[Click e-Stock] "'Strong January Results' Orion, Target Price Up... Positive Outlook for February Too"

As Orion delivered strong results last month not only in Korea but also at its overseas subsidiaries in China, Vietnam, and Russia, Daol Investment & Securities on February 26 raised its target price from 170,000 won to 180,000 won while maintaining its "Buy" investment rating.

Orion's domestic sales last month came in at 97.9 billion won, up 3.6% year-on-year. By channel, sales at discount stores fell 3%, but they increased significantly in e-commerce (+19%), Daiso (+18%), and chain stores (+7%).

During the same period, sales in China grew 37.5%. In China, sales at snack shops more than doubled on the back of launches of bulk pie products and snack bundle products, while online sales (+17%) and TT channels (+7%) also increased. Sales in Vietnam and Russia rose 12.0% and 35.4%, respectively.

Daol Investment & Securities cited signs of a recovery in domestic consumption in Vietnam and an increase in the number of new SKUs handled by snack shops in China as grounds for a share price rise. Lee Dayeon, a researcher at Daol Investment & Securities, said, "In the case of Vietnam, sales of assorted gift sets, which reflect consumer sentiment, increased 20% last month, and competitors are likewise expanding sales of gift sets and promotional products."

Regarding China, she continued, "Since last month, Orion has been expanding exclusive products within Lingshenwang, a major snack-shop franchise, and some products are also scheduled to enter other snack-shop chains," adding, "It is also positive that the number of snack-shop outlets is increasing, particularly in the northern region where Orion has strong market dominance." She added, "The Chinese New Year holiday effect will continue to be reflected through February."

She also pointed out that a decline in prices of raw and subsidiary materials improved the manufacturing cost ratio at the Chinese and Russian subsidiaries by 600bp and 400bp year-on-year, respectively. The researcher stressed, "If the downward trend in raw material prices continues, a meaningful improvement in profit margins will also be possible."