[Click eStock] "Orion, Profit Burden Expected in First Half... Target Price Downgraded"

by Hwang Yoonju

Published 20 Apr.2022 07:30(KST)

[Click eStock] "Orion, Profit Burden Expected in First Half... Target Price Downgraded"

[Asia Economy Reporter Hwang Yoon-joo] Yuanta Securities maintained a 'Buy' rating on Orion on the 20th but lowered the target price to 130,000 KRW. This decision was based on the expectation of profit and loss burdens in the first half of the year due to factors such as China's lockdown and the Russia-Ukraine war.

Researcher Park Eun-jung of Yuanta Securities stated, "The year-on-year sales growth rates by overseas subsidiaries in March were Korea +13%, China -5%, Vietnam +40%, and Russia +7%."

Regarding the China subsidiary, Researcher Park analyzed, "Due to lockdowns in major cities, shipments to small retailers decreased, and domestic sales declined," estimating a double-digit decrease in local currency terms.

She added, "Although the lockdown situation continued into April, orders from small retailers are judged to have somewhat improved compared to March," and explained, "Since the 13th, the Shanghai factory has resumed normal operations, and preparations for flexible production at each factory have been completed to respond to future regional lockdown measures."

[Image source=AP Yonhap News]

Researcher Park pointed out that the Russia subsidiary is facing a double burden. He diagnosed, "In addition to rising raw material and logistics costs, the ruble's value has fallen due to the Ukraine situation (a 25% decline against the Korean won)." To alleviate the burden, the Russia subsidiary implemented a price increase last October and an additional price increase of about 20% starting from the 1st of this month.

The year-on-year profit growth rates by subsidiary were Korea +4%, China +53%, Vietnam +200%, and Russia -8%. China and Vietnam recorded high growth due to a comfortable base.

Researcher Park evaluated, "Although there is a burden of profitability decline due to rising global raw material prices and utility costs across the company, they are continuously defending profits through cost efficiency."