[Click eStock] "Orion, Notable Improvement in Operating Performance Despite Unfavorable Environment"

[Asia Economy Reporter Kwon Jaehee] Hi Investment & Securities maintained a 'Buy' rating and a target price of 170,000 KRW for Orion on the 9th.

Orion's January operating performance growth rate recorded sales of -22.5% and operating profit of -38.3% compared to the previous year. Although the decline in performance appears significant in simple comparison, it is analyzed as a reverse base effect caused by most of the demand being reflected in the previous month due to the timing of holidays in China and Vietnam. Considering that the market is already fully aware of this situation, the related short-term risk factors seem to have been fully reflected in the stock price.

By region, Korea recorded sales and operating profit growth rates of 6.7% and -5.1%, respectively, in January. Despite the reverse base effect related to the holiday timing difference, shipments increased across all channels. Major category growth was balanced across all channels, and considering the recent situation, it is expected that the existing high-growth trend will be restored again from February. Despite the continued burden of rising manufacturing costs, considering that a stable margin level is being maintained, it seems necessary to keep open the possibility of additional leverage expansion this year due to a reduction in cost burdens.

In China, excluding pre-shipments related to the Lunar New Year, there was a -42.2% change year-on-year in RMB terms. However, despite the reverse base effect in January due to simple timing differences, there is no market inventory issue after the holiday, which was a chronic discount factor, and attention should be paid to the fact that shipment flows are steady in line with consumption recovery after the Lunar New Year. Considering the local consumption improvement trend and the competitiveness of new and existing products, concerns this year are expected to be resolved in the short term.

Vietnam showed a limited decline of -7.2% year-on-year on a local basis despite a high base related to the holiday. This indicates that the local high growth trend remains valid beyond the holiday issue. Despite cost burdens, volume growth and the leverage effect have led to a solid upward trend in overall profit contribution. Russia's local sales growth rate was 33.2%, driven by pie growth, the main category similar to the existing trend, and the expansion of the biscuit lineup. Considering that additional line investments are planned this year in both Vietnam and Russia, high growth is expected to continue in the mid to long term.

Lee Kyungshin, a researcher at Hi Investment & Securities, analyzed, "Despite the worsening external environment for the food and beverage industry, such as continued cost burdens and a consumption recession, the trend of operating performance improvement based on regional strategies stands out compared to competitors," and added, "Orion's current stock price level and valuation are judged to be sufficient buying opportunities."