[Click eStock] "Orion, Price Increase Effect Reflected from Q4"

Hana Financial Investment Report

[Asia Economy Reporter Minji Lee] Hana Financial Investment maintained its buy rating on Orion and kept the target price at 170,000 KRW on the 10th. Although the company is expected to report weak earnings in the third quarter, it is anticipated to show an improvement in performance starting from the fourth quarter.

Orion has decided to raise prices at its subsidiaries in China and Russia. The price increase applies to the pie category in the Chinese subsidiary (September, 6-10%) and to all categories in the Russian subsidiary (October, 7%). The effect of the price increase is expected to be reflected from the fourth quarter. While the high base from the previous year will be a burden until the third quarter, the easing of the base and the price increase from the fourth quarter are expected to lead to year-on-year profit growth. Eunju Shim, a researcher at Hana Financial Investment, said, “We estimate an improvement effect of about 20 billion KRW in annual consolidated operating profit compared to the previous estimate,” adding, “This will result in a 6% increase in EPS compared to the previous estimate.”

The consolidated sales for the third quarter recorded 628.9 billion KRW, up 5.3% year-on-year, while operating profit was 102.1 billion KRW, down 5.3% year-on-year. Last year, the Chinese subsidiary’s sales in the third quarter were 306.2 billion KRW, earning about 100 billion KRW per month on average, so the sales growth of the Chinese subsidiary in the third quarter this year is expected to be limited. Additionally, before the price increase is reflected, the burden of rising raw material costs is expected to continue putting pressure on margins.

However, in the fourth quarter, the effect of the price increase is expected to become visible, and the pre-Chuncheon demand is also estimated to have a positive impact on performance. The sales and operating profit of the Chinese subsidiary in the fourth quarter are analyzed to increase by 14.5% and 49.5%, respectively. Due to the strong performance of the Chinese subsidiary, consolidated sales and operating profit are predicted to increase by 12.7% and 39.3%, respectively. Next year, consolidated sales and operating profit are expected to grow by 7% and 13.1%, respectively, showing a steady improvement in performance.

Researcher Eunju Shim said, “The current stock price is only 17 times the 12-month forward PER (price-to-earnings ratio), which is at a historical low,” adding, “Considering the future improvement in performance, it is an attractive valuation.”

This content was produced with the assistance of AI translation services.