[Click eStock] "CJ CheilJedang, Bio Industry Boom and Food & Beverage Market Dominance... Maintaining External Growth"

[Asia Economy Reporter Kwon Jaehee] KB Securities maintained its 'Buy' rating and target price of 470,000 KRW for CJ CheilJedang on the 11th.

CJ CheilJedang's consolidated sales for the first quarter are expected to reach 6.6824 trillion KRW, with an operating profit of 397.7 billion KRW. The operating profit is anticipated to meet the market consensus of 385.8 billion KRW. Excluding CJ Logistics, sales are projected at 4.1409 trillion KRW, with an operating profit of 308.5 billion KRW. CJ CheilJedang plans to initiate quarterly dividends starting this quarter.

Lee Seonhwa, a researcher at KB Securities, analyzed, "Although there has been a cost burden due to recent raw material price increases, the company is expected to maintain strong performance growth based on market dominance."

The food division continues to face pressure from rising raw material input costs but focuses on margin protection through price increases and external growth. The domestic food division is experiencing growth centered on online and B2B channels, despite ongoing raw material cost burdens. The global food division, led by Schwann's price increase implemented last October, is seeing sales growth; however, profitability is expected to slightly decline year-on-year due to persistent logistics and labor cost pressures caused by the resurgence of COVID-19. Consequently, total food division sales are expected to increase by 13.7% year-on-year, while operating profit is projected to decrease by 2.9%.

The bio division still faces cost burdens but is implementing sufficient price increases to offset these, leading to expected sales growth of 17.9% and operating profit growth of 54.8% year-on-year. The F&C division is expected to see sales increase by 2.7% year-on-year and operating profit decrease by 79.6%, as the livestock market conditions in Southeast Asia improved compared to the previous quarter, but the high base from the same period last year limits growth.

The researcher stated, "The bio division maintains high margins based on market dominance and rising lysine spot prices, and the food division also has a business model that facilitates price increases despite rising raw material costs, so there will be no significant changes to the estimated average annual operating profit growth rate for 2022?2024."