[Click eStock] "CJ CheilJedang, Strong Q3 Performance Expected... Thanks to Solid Fundamentals"

Korea Investment & Securities Issues 'Buy' Rating and 580,000 KRW Target Price... Closing Price on 13th at 398,000 KRW

Bibigo Soup Dishes by CJ CheilJedang (Photo by Asia Economy DB)

[Asia Economy Reporter Geum Bo-ryeong] Thanks to CJ CheilJedang's solid fundamentals, it is analyzed that the company will show strong performance in the third quarter as well.

According to Korea Investment & Securities on the 14th, CJ CheilJedang's consolidated sales for the third quarter are estimated at 6.31 trillion KRW, with an operating profit of 401.1 billion KRW. This represents an 8% increase in sales and a 47% increase in operating profit compared to the previous year.

Processed foods are selling well both domestically and internationally. Operating profit in the food division is expected to increase by 31% year-on-year to 171.7 billion KRW. Domestic processed food sales are estimated to have increased by 4% compared to the previous year, driven by increased demand for home meal replacements (HMR) due to strengthened social distancing measures and strong sales of Chuseok gift sets. Schwans' sales are expected to continue double-digit growth with a 15% increase year-on-year, supported by rising pizza market share and strong B2C sales. Excluding Schwans, global sales are expected to increase by 38% year-on-year due to growing demand for processed foods such as dumplings.

The profitability of the bio division is also remarkable. Lee Jung-eun, a researcher at Korea Investment & Securities, stated, "Operating profit in the bio division is projected to increase by 159% year-on-year to 128.3 billion KRW. Although the prices of major amino acids declined compared to the second quarter, the rising proportion of high-margin product sales is expected to more than offset this." She added, "In the second quarter, the proportion of high-margin product sales exceeded 30%, improving the bio division's operating profit margin by 10 percentage points compared to the previous year. With continued product mix improvements, the operating profit margin is expected to reach 10% in the third quarter as well. The Vietnamese pork price remained strong at 78,000 to 80,000 VND per kilogram in September, and the division is expected to achieve four consecutive quarters of profit."

Korea Investment & Securities has given CJ CheilJedang a 'Buy' rating with a target price of 580,000 KRW. The closing price on the 13th was 398,000 KRW.