[Click eStock] "Orion Must Prove with Performance Amid Market Slowdown... Target Price Down"

Hanwha Investment & Securities lowered the target price for Orion to 130,000 KRW on the 19th, stating that "to dispel concerns arising from the slowdown in market growth, the only way is to prove it through performance." The buy rating was maintained.

On the same day, researchers Han Yoo-jeong and Lee Da-yeon from Hanwha Investment & Securities said, "According to the market research firm Euromonitor, the compound annual growth rate (CAGR) of the Chinese confectionery market from 2022 to 2025 is projected to be 3.1%. This indicates a slowdown in market growth compared to the early 2010s when Orion experienced high growth (2011-2014 CAGR of 9.2%)."

They added, "Contrary to the unfavorable market conditions, we estimate Orion's annual average sales growth rate in China from 2022 to 2025 to be 6.1%, driven by the expansion of jelly market share, increased sales of new snack and pie products, the shift of Chinese small retailers (intermediary sellers who purchase goods from manufacturers and resell to consumers) to indirect sales, and channel expansion. To dispel concerns based on the market growth slowdown, it is necessary to prove it through actual performance," they emphasized.

Regarding the downward revision of the target price, they explained, "Considering Orion's growth potential in the global food market, the comparable group was set to include Tingyi, Want Want, Mondelez, Pepsi, and Garubi, applying a target multiple of 17.6 times. However, taking into account the conservative investment tendencies in the food industry compared to global food companies, the comparable group was changed to the domestic food and beverage sector. Considering Orion's position and excellent profitability in the Chinese, Vietnamese, and Russian markets, a 20% premium was applied to the domestic food and beverage sector average, resulting in a revised target multiple of 12.4 times."

Researcher Han noted, "Although unexpected large-scale investments have been made since the beginning of the year, Orion's policy of expanding dividends is expected to continue. If significant growth in scale and market share in the core business is confirmed in the future, it will be possible for both earnings estimates and target multiples to rise simultaneously."

Regarding the investment in LegoChem Biosciences, they evaluated, "Orion will become the largest shareholder of LegoChem Biosciences. On the 15th, Orion agreed to acquire a 25.73% stake in LegoChem Biosciences for 548.5 billion KRW through the acquisition of existing shares and a third-party allotment capital increase. This will be recognized using the equity method in future earnings, so the impact on Orion's performance is expected to be limited."

Researcher Han added, "However, regardless of the impact on the income statement, since the holding company transition in 2017, Orion Holdings has continued investments in non-food businesses, while Orion has focused on food investments. With this equity investment being made by the operating company Orion, the possibility of Orion investing in non-food businesses in the future cannot be ruled out."

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