Hanwha Investment & Securities on the 17th said Orion's China subsidiary is growing faster than the market expects. It kept a target price of 180,000 won and a "buy" recommendation. Orion's previous session closing price was 129,000 won.
In the previous month, Orion's combined sales by subsidiary rose 13.1% year over year to 254.4 billion won, and operating profit increased 11.6% to 36.5 billion won. Han Yu-jung, an analyst at Hanwha Investment & Securities, said, "Although the prior-year base effect weighed on the China subsidiary in that month, it posted the highest same-month sales in both won and local currency terms, showing growth beyond expectations."
Despite fewer business days due to the Lunar New Year holiday, the China subsidiary achieved triple-digit growth in sales through the snack-shop channel by expanding exclusive products and increasing the number of stores. China subsidiary sales rose 16.5% in won terms and 6.9% in local currency terms.
In Korea, domestic demand continued strong growth centered on e-commerce and Asung Daiso Co., but shipments to some discount stores declined, and Korea subsidiary sales fell 2.2%, showing some weakness. The analyst said, "Production and shipments decreased, which led to a higher manufacturing cost ratio, so operating profit rose only 0.7%, but we view it as temporary."
In Vietnam, shipments increased evenly across categories such as stack, pie and biscuits, and in Russia, the launch of channel-exclusive products and an expanded number of stock keeping units (SKU) drove a 77.8% increase in operating profit.
Hanwha Investment & Securities focused on the growth of the China subsidiary. In Nov.–Dec. last year and Jan.–Feb. this year combined, China sales totaled 527.5 billion won, up 13.4% from the same periods a year earlier, respectively.
The analyst said, "Orion's market response through channel-specific strategic product launches will drive outperformance as the share of snack shops increases within China's food market."
He added, "Despite a weaker won, integrated inter-subsidiary purchasing of materials and supplies offset the impact, and the burden from rising cacao prices is expected to ease starting with the Korea subsidiary in the second quarter of this year."