[Click eStock] "Orion, Current Stock Price Excessively Undervalued... Target Price Up"

[Asia Economy Reporter Kwon Jaehee] Shinhan Investment Corp. maintained a 'Buy' rating on Orion on the 16th and raised the target price by 4% from the previous 130,000 KRW to 135,000 KRW.

Orion's year-on-year sales growth rate by country in October recorded 14.2% in Korea, 13.6% in China, 37.8% in Vietnam, and 129.2% in Russia. Operating profit increased across all regions thanks to cost-efficiency efforts despite overall cost burdens.

Notably, the positive turnaround in operating profit in China after four months is encouraging. Although the increase in raw material and utility costs inevitably raised the cost ratio, sales in RMB increased by 5%, supported by growth in the snack category despite sluggish domestic consumption.

The previously sluggish Chinese market appears to have passed its peak concerns and entered a recovery phase. In 2016, Orion's sales growth in RMB was only 4% due to weak domestic consumption in China, but the current situation differs from 2016. At that time, structural factors such as holiday inventory surplus, consumption slump, and retail restructuring were at play, whereas the current consumption downturn is analyzed as a short-term factor due to the zero-COVID policy. Furthermore, recent signals of easing China's quarantine policies suggest that consumer sentiment will gradually recover.

Researcher Cho Sanghoon of Shinhan Investment Corp. stated, "The current valuation is excessively undervalued at a 12-month forward price-to-earnings ratio (12M Fwd PER) of 12 times," adding, "If future new product launches, channel expansion leading to market share growth, category expansion, regional expansion, and a rebound in Chinese domestic consumption become visible, it will enter a premium valuation range."