[Click eStock] "Orion, Significant Changes in Chinese Performance Due to Lunar New Year Timing"

On the 14th, NH Investment & Securities analyzed that Orion experienced significant fluctuations in the performance of its Chinese subsidiary in February, following similar changes in January, due to differences in the timing of the Lunar New Year. Since the business conditions in other countries excluding China are estimated to be all favorable, it is considered reasonable to expect performance in March when all Lunar New Year-related issues will have subsided. Currently, the stock price is trading below a PER of 10, falling below the lower end of the valuation band, so a stock price recovery driven by improved performance is anticipated.

Looking at the February performance by country, in South Korea, an increase in shipments was confirmed across all distribution channels. By category, the year-on-year growth rates were approximately +14% for snacks, +7% for biscuits, and +12% for pies. This is due to stable shipment increases of existing buoyant products as well as the effects of new product launches, with new products accounting for about 8% as of February. Operating profit continues to improve despite increased logistics costs, thanks to the short-term decline in major raw material prices such as flour and shortening.

In China, there is a baseline burden due to the difference in holiday timing, and the resulting sales decline is estimated to be around 14 billion KRW. Operating profit also deteriorated as the fixed cost burden increased due to reduced shipment volume, causing the cost ratio to rise by 0.6 percentage points. Additionally, a temporary sales gap (about 5 billion KRW per month) continues due to the indirect sales transition of some channel distributors (intermediary sellers), but the negative impact on operating profit is not significant.

In Vietnam, efforts are focused on normalizing shipments after the holiday, and the sales growth rate is also recorded at a level similar to previous estimates. The cost ratio is improving due to a decline in raw material prices, and profit margins are also showing an improving trend.

In the Russian region, despite a -16.6% impact from exchange rates due to the weak ruble, the highest sales growth rate continues. On a local currency basis, the year-on-year sales growth rate is estimated to be around 40%. This is attributed to the effect of new production line operations. Younghoon Joo, a researcher at NH Investment & Securities, said, "It is regrettable that despite high sales growth, operating profit remains the same as the previous year due to increased manufacturing costs from exchange rate effects and higher selling and administrative expenses."