CJ CheilJedang Bounces Back Overcoming Adjustment

[Asia Economy Reporter Eunmo Koo] CJ CheilJedang has rebounded after a stock price correction that lasted for the past 10 trading days. The prolonged COVID-19 pandemic has expanded the 'home-cooked meal' trend, which is expected to drive performance improvement in the third quarter, acting as the momentum for the rebound.

According to the Korea Exchange on the 11th, CJ CheilJedang's stock price closed at 401,500 KRW, up 6.92% (26,000 KRW) from the previous trading day. After experiencing a 10.2% decline over 9 trading days from the 27th of last month to the 9th, CJ CheilJedang reversed to an upward trend with the rebound on the previous day, marking a rise after 10 trading days. As of 9:30 AM on the same day, the stock continued its rebound trend, trading at 407,500 KRW, up 1.49% (6,000 KRW) from the previous day.

The recent stock price correction of CJ CheilJedang was due to concerns that third-quarter earnings would be weak as sales of Chuseok gift sets declined amid the impact of COVID-19. However, considering the external environment, demand has been planned conservatively, and the gift set product lineup is being adjusted to meet consumer demand, leading to a low likelihood of oversupply. The stock price appears to be responding to this possibility.

On the contrary, as COVID-19 prolongs, both domestically and internationally, lifestyles favor eating at home rather than dining out, leading to expectations that the performance improvement trend will continue. Sangjun Park, a researcher at Kiwoom Securities, stated, "Even excluding the impact of the COVID-19 resurgence since mid-August, dining-out demand from May to July did not show additional recovery. Considering the low penetration rate of ready-to-eat meals in the domestic market and the trend of consumers choosing familiar categories due to the shift from dining out to eating at home, the domestic processed food sales growth rate is expected to grow close to 10% in the third quarter."

Researcher Eunju Shim from Hana Financial Investment also noted, "Unlike in the past, the significant increase in orders through online channels is positive from a profitability perspective. Since social distancing level 2.5 has been implemented since the end of August, sales and profit growth in the processed food sector are expected to continue in the third quarter."

According to financial information provider FnGuide, CJ CheilJedang's operating profit for the third quarter of this year is estimated at 366.8 billion KRW, a 34.5% increase compared to the same period last year. Sales for the same period are also projected to rise 7.9% to 6.3184 trillion KRW.