[Click eStock] "Orion, Positive Growth Starting This Month... Faster Performance Improvement Expected"

Shinhan Investment Corp. maintained its buy rating and target price of 150,000 KRW on Orion on the 15th, stating that China's zero-COVID-19 policy is entering its final stage this year, leading to a gradual recovery in domestic consumption and a faster improvement in performance.

Orion's year-on-year sales growth by country last month was 19% in South Korea, 24.8% in China, 7.2% in Vietnam, and 51% in Russia. It was assessed that sales grew across all regions as the company quickly recovered from poor performance in January caused by the early Lunar New Year holiday. Operating profit was favorable despite cost pressures, supported by increased sales and efforts to improve cost efficiency.

Only Vietnam recorded a profit decline due to a contraction in domestic consumption, but normalization has been underway since this month. The increase in operating profit in China is described as encouraging. Raw material and utility cost increases continued. However, sales in yuan terms grew by 27% through growth in the snack category, and cost reduction efforts such as bidding expansion and auxiliary material efficiency improvements continued, leading to an improvement in the cost ratio.

The market's concern is that momentum is limited due to the high performance base in the first quarter of last year. Sanghoon Cho, a researcher at Shinhan Investment Corp., explained, "A decline in first-quarter performance is inevitable due to the timing difference of the Lunar New Year, but the company is quickly recovering from the January slump, and momentum is expected to strengthen again from the second quarter."

He added, "The leverage effect from China's reopening is greater than the efforts to improve cost efficiency. Although the growth rate of the Chinese confectionery market will not be as high as in the past, Orion has gained an advantage in market share competition through aggressive new product launches since the second quarter of last year. Notably, unlike competitors, Orion has improved performance solely through product competitiveness without raising prices, which is significant."