[Click e-Stock] "Orion's JoongAng Ilbo Acquisition Uncertainty Eases... Enters Q4 Peak Season"

Orion Loses Bid to Acquire JoongAng Ilbo

Concerns Over Damage to Core Business and Overhang Ease

China's Lunar New Year and Vietnam's Tet to Boost Fourth-Quarter Results Earlier than Usual

Analysts say Orion will put recent uncertainty over a potential merger and acquisition (M&A) behind it and continue to post solid overseas growth, buoyed by the start of the year-end holiday season.

On Oct. 20, Ryu Eunae, an analyst at KB Securities, said, "Orion's share price weakened recently following news that it was participating in the bidding for JoongAng Ilbo, but the uncertainty has eased after the Daou-CJ consortium was selected as the preferred bidder yesterday." Ryu maintained a "Buy" rating and a target price of KRW 160,000.

Orion's share price fell after reports emerged in late September that it was participating in the bid to acquire management control of JoongAng Ilbo. Investor sentiment weakened amid concerns that the acquisition would reduce near-term earnings growth momentum and generate limited synergies with Orion's core confectionery business.

However, market concerns appear to be easing quickly after the Daou Kiwoom Group-CJ Group consortium was named the preferred bidder from among the six parties that submitted final bids. "The consortium's bid is understood to be KRW 500 billion, while the unsuccessful bidders offered around KRW 300 billion to KRW 400 billion," Ryu said. "Although the process is still at the preferred-bidder stage, the amount offered was the top evaluation criterion set by JoongAng Ilbo's creditors, so we believe the related uncertainty has eased."

Orion will enter its peak earnings season in the fourth quarter. KB Securities estimates that Orion's fourth-quarter revenue will rise 4.2% year over year to KRW 963.8 billion, while operating profit will increase 6.6% to KRW 178.7 billion. After the third quarter, when concerns over intensifying competition and costs stemming from Iran weighed heavily, the effects of China's Lunar New Year and Vietnam's Tet holiday will begin to be reflected in results from the fourth quarter. Next year's Lunar New Year and Tet fall on Feb. 6, about 10 days earlier than this year. As a result, orders from Chinese local distributors are expected to be concentrated in November.

"Although the stronger won will inevitably reduce the positive impact of exchange rates, China, Vietnam and Russia are all expected to continue posting solid growth in local-currency terms," Ryu noted. The forecast growth rates in local-currency terms are 7.2% for China, 7.0% for Vietnam and 22.0% for Russia. In particular, Orion's Russian subsidiary is expected to post the highest growth among its overseas subsidiaries, as exports increase while strong demand for pies keeps capacity utilization above 100%.

Profitability is also clearly improving. "Lower raw-material input costs at the Chinese and Russian subsidiaries will offset Iran-related cost pressures at the Korean and Vietnamese subsidiaries, supporting continued year-over-year improvement in operating margins," Ryu added.

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