[Click eStock] "CJ Freshway Severely Undervalued, Fundamentals Are Clear"

"With the End of With-Corona, Performance Recovery Trend Will Remain Strong"

[Asia Economy Reporter Minwoo Lee] CJ Freshway's stock price is plummeting due to concerns over the early end of 'With Corona (gradual return to daily life).' However, this is considered an excessive worry, and since the fundamentals are clear, the stock is severely undervalued.

On the 29th, Hanwha Investment & Securities maintained its 'Buy' rating and target price of 48,000 KRW for CJ Freshway based on this background. The closing price on the previous trading day was 26,000 KRW. Since the closing price of 33,750 KRW on the 15th, it has continued to decline by about 23%. The sharp drop was due to concerns over the early end of With Corona as COVID-19 confirmed and severe cases increased. This is interpreted as a result of decreased expectations ahead of December, the peak season of the year.

However, Hanwha Investment & Securities judged that the notion that operating performance will sharply slow down even if With Corona ends is a 'groundless fear.' Despite strengthened social distancing in the third quarter, customer attraction was maintained, resulting in stable operating performance, and profit growth was rapid this month due to normalization of business activities. Additionally, profits improved due to adjustments in low-profit clients and an increase in high-profit sales channels, and despite a decline in customer attraction in the upstream industry, delivery services offset poor performance.

Against this background, CJ Freshway recorded an operating profit of 16.4 billion KRW in the third quarter of this year, a 38.6% increase compared to the same period last year. Although sales decreased by 13.6% year-on-year to 562.9 billion KRW, net profit turned positive to 17.4 billion KRW. Hanwha Investment & Securities expects sales of 646.1 billion KRW and operating profit of 22 billion KRW in the fourth quarter of this year, representing a 7.6% increase and a return to profitability compared to the same period last year. Nam Sung-hyun, a researcher at Hanwha Investment & Securities, emphasized, "Even if social distancing is strengthened in December, the possibility of a significant decline in operating performance is limited," adding, "The upward revised market consensus is fully achievable."