[Click eStock] “CJ CheilJedang Offsets Base Effect with Bio Division Boom”

KB Securities "Maintains Target Price at 570,000 Won"
Increase in Pig Farming Numbers in China Region... Leading to Rise in Prices and Sales Volume

[Asia Economy Reporter Gong Byung-sun] CJ CheilJedang, which benefited from COVID-19 last year, is expected to offset the base effect with a boom in the bio sector and high pork prices in the Vietnam region. On the 20th, KB Securities maintained a target price of 570,000 KRW and a 'buy' investment rating for CJ CheilJedang.

The boom in the bio sector is interpreted to offset the base effect. The increase in pig farming numbers in China is leading to higher prices and increased sales volume. In addition, as corn prices in China have surged, the prices of feed additives are also rising accordingly. Prices in the bio sector, which began to rise since October last year, are expected to be fully reflected from the second quarter.

In the Southeast Asian region, pork and broiler prices are rising. In Vietnam, the high pork price trend continues. The average annual pork price last year was 73,500 VND per kilogram (approximately 3,550 KRW), up 65.7% compared to the same period last year. In Indonesia, broiler prices are normalizing, having bottomed out in the second quarter last year and rebounded since then.

The food sector is expected to steadily grow despite the COVID-19 base effect. Although the materials sector continues to show a negative growth trend, overall sales grew due to strong performance in the domestic processed food sector driven by the Lunar New Year holiday demand. In China, dumplings, and in Japan, vinegar-based foods are performing well, with double-digit growth expected. KB Securities researcher Lee Sun-hwa explained, "However, Schwans' sales are expected to decrease by 4.5% year-on-year due to a high base last year and unfavorable exchange rate effects."

First-quarter earnings this year are expected to meet market consensus. Researcher Lee said, "First-quarter sales are expected to increase by 5.6% year-on-year to 6.1586 trillion KRW, and operating profit is expected to rise by 18.1% year-on-year to 325.9 billion KRW," adding, "This performance aligns with the consensus operating profit of 329 billion KRW."