[Click eStock] "CJ CheilJedang, Limited Impact from COVID-19"

Hana Financial Investment Issues 'Buy' Rating and 370,000 KRW Target Price... Closing Price on 25th at 262,000 KRW

CJ CheilJedang's representative frozen HMR product (Photo by Asia Economy DB)

[Asia Economy Reporter Geum Bo-ryeong] An analysis has been raised that the impact of the novel coronavirus disease (COVID-19) on CJ CheilJedang will be limited.

According to Hana Financial Investment on the 26th, CJ CheilJedang's consolidated operating profit for the first quarter of this year is estimated to be 246 billion KRW, an increase of 37.4% compared to the previous year. Sales are expected to increase by 14.2% to 5.7325 trillion KRW.

Shim Eun-joo, a researcher at Hana Financial Investment, said, "Although negative effects due to the domestic spread of COVID-19 are inevitable, the impact on the overall company’s performance is expected to be limited. Fortunately, domestic processed food demand for gift sets due to the early Lunar New Year was reflected in the fourth quarter of last year, and despite decreased traffic in large supermarkets, stock shortages are occurring due to panic buying of groceries." She added, "Excluding CJ Logistics, the China exposure within CJ CheilJedang’s sales is estimated to be around 5%. Since China’s profit contribution was very limited, even with conservative estimates, profits excluding CJ Logistics are expected to decrease by about 3% compared to previous estimates. It is time to focus on the group’s commitment to improving profitability and strengthening resilience rather than vague concerns."

The processed food sector is expected to show solid profit improvement compared to the previous year as the effect of SKU restructuring becomes visible. The expansion of the base in the U.S. through integrated operations with 'Shuangzi' is also having a positive effect. The bioresources sector is rapidly recovering its performance. The bio division is expected to improve margins through an increased proportion of high-margin amino acids.

Hana Financial Investment gave CJ CheilJedang a 'Buy' investment rating with a target price of 370,000 KRW. The closing price on the 25th was 262,000 KRW.