[Click eStock] "CJ Freshway, 3 Consecutive Quarters of Surprises... Strong Performance Continues Through Next Year"

[Asia Economy Reporter Park Jihwan] Meritz Securities evaluated CJ Freshway as having recorded earnings surprises for three consecutive quarters this year and expects the earnings momentum to continue through next year. The firm maintained a buy rating and a target price of 41,000 KRW.

Researcher Kim Jungwook of Meritz Securities stated, "Q3 sales amounted to 562.9 billion KRW, a 13.6% decrease compared to the previous year," and added, "Operating profit was 16.4 billion KRW, a 38.7% increase." This exceeded market expectations by 10.8%.

Despite strengthened social distancing measures in Q3, benefits from recovery in lunch and catering sectors centered on franchises were observed. The removal of the livestock distribution division helped maintain high margins, and by channel, franchise performance was strong while general restaurant channels showed weakness.

In Q4, the with-COVID-19 policy and effects of new catering orders are expected to sustain the earnings growth trend. Researcher Kim Jungwook said, "Due to the with-COVID-19 effect, a high sales growth trend has been observed since October, and external growth effects from new catering orders are also expected," adding, "consumer sentiment recovery, favorable conditions in the dining and catering front markets, and expanded order momentum due to large corporate catering orders in the second half of the year have all contributed."

Researcher Kim Jungwook also stated, "Next year is expected to be a year of profitability improvement, with sales growth expected to reappear due to the rapidly improving dining industry conditions."