[Click eStock] "Orion, Increasing Uncertainty in Russian and Chinese Markets"

Hana Financial Investment Report

[Asia Economy Reporter Minji Lee] Hana Financial Investment maintained its buy rating and target price of 170,000 KRW for Orion on the 1st.

In the first quarter, Orion is expected to record consolidated sales and operating profit of 631 billion KRW and 96.7 billion KRW, respectively, down 4.8% and 5.1% year-on-year. This slightly misses market expectations.

Looking at the cumulative sales growth rate by corporation from January to February, domestic sales grew by 9.2%, China by 3.2%, Vietnam by 18.8%, and Russia by 46.5%. Considering exchange rate effects, the local growth rates in China, Vietnam, and Russia are estimated at 0.7%, 10%, and 42%, respectively. China is experiencing a contraction compared to the previous year due to continued sluggish domestic consumption. Vietnam's domestic demand remains solid, with an expansion in the mass bread category being a key factor.

In Russia, current raw material inventory is stocked until May, so production is expected to face no major disruptions until then. Eunju Shim, a researcher at Hana Financial Investment, explained, “However, exchange rates have been a burden since March; the value of the ruble in March fell 30% compared to the same month last year, with a high possibility of further decline. March sales in China and Vietnam are expected to show trends similar to January and February, while Russia will face performance pressure due to the sharp drop in ruble value.”

Annual sales and operating profit for this year are expected to reach 2.544 trillion KRW and 389.8 billion KRW, up 8% and 4.5% year-on-year, respectively. Sales growth will remain solid due to yuan appreciation, but profit is expected to remain at last year’s level due to increased cost burdens. The local currency growth rates by corporation, excluding exchange rate effects, are estimated at 5% for domestic, 1.2% for China, 14.9% for Vietnam, and 17.7% for Russia.

Researcher Shim stated, “Even excluding uncertainties in Russia, the slowdown in domestic consumption in China is a burden. Due to the global surge in raw material prices, margin erosion seems somewhat inevitable, but local Chinese food companies are likely defending their performance through price pass-through.”

She added, “Considering the mixed uncertainties, box trading in the 80,000 to 100,000 KRW range seems valid for the time being.”

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