[Click e-Stock] "Orion, Valid Expectations for Recovery in Chinese Consumer Demand"

On May 21, LS Securities projected increased demand for Orion products in China and Russia. The firm maintained a "Buy" investment rating and set a target price of 160,000 won.

Orion's provisional sales for April amounted to 264.6 billion won, with operating profit at 42.6 billion won. Sales rose by 8.5% year-on-year, while operating profit declined by 1.8%, reflecting somewhat sluggish performance.

In particular, the decline in operating profit at the China subsidiary was significant. The China subsidiary reported sales of 106 billion won and operating profit of 19.1 billion won. While sales increased by 2.6% year-on-year, operating profit decreased by 10.7%.

Park Sungho, an analyst at LS Securities, explained, "Although strong growth continued in snack shops and e-commerce channels, sales in local currency terms declined by 2% due to the impact of competitors clearing out holiday inventories."

The Vietnam subsidiary achieved an 11.4% year-on-year increase in operating profit, reaching 3.9 billion won, as improved cost of goods sold was driven by robust sales of new products and increased overall sales volume.

The Russia subsidiary recorded a 59.1% year-on-year increase in operating profit, reaching 3.5 billion won, attributed to the strong ruble and high growth in demand for pie products.

Analyst Park stated, "The weak performance at the China subsidiary in April was due to aggressive discounting by competitors aimed at clearing inventory. Given the competitors' profitability considerations, this issue is likely to be temporary. We expect demand in China to recover in the second half of the year, centered on high-growth channels."

He added, "For the Russia subsidiary, we expect high growth to continue through the second half. In the fourth quarter, two new pie production lines will begin full operation, and if the high ruble exchange rate stabilizes, we can also expect improvement in profit margins."