[Click eStock] "CJ CheilJedang, Performance Growth Momentum to Continue Throughout This Year"

"Strong Performance Continued in Q4 Last Year, Business Growth Expected This Year in China, the US, and More"

[Asia Economy Reporter Minwoo Lee] CJ CheilJedang is expected to post strong performance in the fourth quarter of last year. It is also evaluated that there is abundant potential for performance growth this year, including sales growth in the Chinese bio sector and the U.S. local subsidiary.

On the 21st, Korea Investment & Securities forecasted that CJ CheilJedang would record consolidated sales of 6.362 trillion KRW and operating profit of 318.1 billion KRW in the fourth quarter of this year. This represents an increase of 7% and 18%, respectively, compared to the same period last year. Excluding CJ Logistics, sales and operating profit were expected to be 3.549 trillion KRW and 230.5 billion KRW, respectively. Sales were expected to increase by 7% and operating profit by 34% compared to the fourth quarter of the previous year.

The food division showed particularly strong performance. Sales reached 2.244 trillion KRW, up 6% year-on-year, while operating profit was estimated at 114.8 billion KRW, a 106% increase over the same period. Domestic processed food sales increased by about 8%, attributed to increased demand following the year-end social distancing measures. Sales of Schwan's, a U.S. frozen food company acquired in 2018, were estimated to have increased by 10% during the same period, but due to the strong Korean won, the increase was limited to 4%. Overseas sales excluding Schwan's grew by 29% during this period, maintaining a high growth trend.

Sales and operating profit in the bio division were estimated at 785.8 billion KRW and 77.8 billion KRW, respectively. Compared to the same period last year, sales increased by 10% and operating profit by 13%. Lee Jung-eun, a researcher at Korea Investment & Securities, analyzed, "With the recovery of pig farming numbers in China, grain prices, led by feed grains, are soaring," adding, "This leads to an increase in feed additive prices and sales volume, sustaining strong performance this year."

Following the strong performance in the fourth quarter, the momentum for performance growth is expected to continue this year. Attention should be paid to the sustained strong performance in the bio sector due to the recovery of livestock numbers in China, synergy effects from the integration of B2C sales networks of Schwan's and CJ's U.S. local subsidiary, and the possibility of price increases in the second half due to rising grain prices. Operating profit excluding CJ Logistics is expected to increase by 7% from last year to 1.134 trillion KRW. The researcher analyzed, "Since the fourth quarter of last year, integration of Schwan's and the U.S. B2C channel has been underway, and based on Schwan's logistics system strengths and Bibigo product quality, the entry rate of dumplings in the U.S. mainstream channel is continuously rising," adding, "Expansion to additional product categories beyond dumplings is also expected."

Against this backdrop, Korea Investment & Securities maintained a 'Buy' rating and a target price of 580,000 KRW for CJ CheilJedang. The closing price the previous day was 433,500 KRW. The firm also continued to designate it as the top pick within the industry.