Lower Earnings Expectations Amid Stronger Won; Orion Corporation Target Price Cut

[Financial News] Kiwoom Securities lowered Orion Corporation’s target price from KRW 175,000 to KRW 155,000, reflecting a decline in overseas earnings caused by the stronger Korean won. However, it maintained its “Buy” rating, citing continued sales growth in local currencies and the potential for price increases and higher dividends.
Park Sang-jun, a researcher at Kiwoom Securities, explained on the 14th, “We broadly lowered our earnings estimates, taking into account the Korean won’s recent sharp appreciation against major currencies.” He added, “Because Orion Corporation produces and sells locally, operating margins will not be significantly affected. However, sales and operating profit translated into Korean won need to be lowered.”
Accordingly, Kiwoom Securities cut its forecasts for Orion Corporation’s consolidated sales and operating profit next year by 9% each from its previous estimates. Next year’s projected sales are KRW 3.7567 trillion, while operating profit is expected to reach KRW 629.4 billion.
The company continued to post growth last month. Orion Corporation’s combined sales in South Korea, China, Vietnam, and Russia totaled KRW 301 billion in August, up 9% from the same month a year earlier. Operating profit rose 5% to KRW 50.5 billion.
Growth is also expected to continue in local-currency terms. “Sales are expected to grow by around 5–6% in local-currency terms,” Park said. “In China, sales growth through snack-specialty stores remains strong, while Russia is likely to achieve double-digit sales growth without difficulty following the expansion of its new pie production line.”
The possibility of product price increases also drew attention. “As the burden of rising costs, particularly for packaging materials, has grown recently, it is necessary to pay attention to the possibility of price increases over the medium term,” Park said.
Higher dividends were also cited as a factor that could lead to a revaluation of the stock. Orion Corporation has steadily increased its dividend payout ratio and dividend per share (DPS) over the past three years. Its DPS is also expected to rise this year as earnings increase.
“An additional increase in the dividend payout ratio could also have a positive effect on valuation,” Park said.
[email protected] Bae Han-geul Reporter