[Click eStock] "CJ CheilJedang, Strong Q2 Performance Expected in Both Food and Bio Sectors"

Hana Financial Investment Issues 'Buy' Rating and Sets Target Price at 450,000 Won... Closing Price on 30th Last Month Was 326,000 Won

CJ CheilJedang's Bibigo Premium Porridge 3 Types (Photo by Asia Economy DB)

[Asia Economy Reporter Kum Boryeong] Hana Financial Investment on the 1st issued a 'Buy' investment opinion on CJ CheilJedang, as strong performance is expected in both the food and bio sectors for the second quarter. The target stock price was raised from the previous 370,000 KRW to 450,000 KRW. The closing price on the 30th of last month was 326,000 KRW.

According to Hana Financial Investment on the day, CJ CheilJedang's consolidated sales for the second quarter are estimated at 5.8198 trillion KRW, with an operating profit of 255.4 billion KRW. These figures represent increases of 5.5% and 45.7% respectively compared to the previous year. Excluding logistics, sales and operating profit are expected to rise by 6% and 67.6% year-on-year to 3.3762 trillion KRW and 176.6 billion KRW, respectively.

Following the strong performance in the processed and bio-resources sectors in the first quarter, improvements in the bio sector's results are also anticipated. The domestic processed food sector is expected to see balanced improvements in sales and operating profit due to increased operating rates at the Jincheon plant driven by expanding demand for Home Meal Replacement (HMR). The overseas processed food sector is expected to grow by more than 30% in the second quarter, following a 34.5% increase in sales by overseas subsidiaries in the first quarter compared to the previous year.

Sim Eunju, a researcher at Hana Financial Investment, explained, "'Shuangzi' is expected to deliver a performance surprise, showing double-digit sales growth due to increased demand in the B2C (business-to-consumer) channel despite a slowdown in demand in the B2B (business-to-business) channel. In the bio sector, steady profit growth is expected compared to the previous quarter due to price increases of key amino acids (lysine, tryptophan). The bio-resources sector is likely to contribute significant profits in the second quarter as the strong pork prices in Vietnam continue."

This year, the overseas proportion of the food sector (processed + materials) is estimated to reach 45%. In the United States, various efforts to create synergies with Shuangzi, such as integration of sales networks, have been underway since the second half of last year. Analysts suggest that this is a timely opportunity to expand the base in the U.S. market through mid- to long-term channel exchanges and diversification of the product portfolio.

Researcher Sim said, "The momentum for performance in the second half remains valid," adding, "Improved margins driven by steady top-line growth in overseas processed food sales and solid performance in the bio sector due to recovery in the amino acid market will drive the company's overall profitability."