[Click eStock] "CJ Benefits from Social Distancing Easing... Earnings Turnaround Expected"

[Asia Economy Reporter Myunghwan Lee] SK Securities announced on the 17th that it maintains a buy rating and a target price of 113,000 KRW for CJ. This is due to the expected benefits from the easing of social distancing measures for major unlisted subsidiaries.

CJ's sales in the first quarter of this year increased by 13.8% year-on-year to 9.118 trillion KRW, and operating profit rose by 11.2% to 497.8 billion KRW. The operating profit margin was recorded at 5.5%. CJ Olive Young's sales increased by 29.4% year-on-year due to growth in online sales and a rebound in offline sales. CJ Foodville's sales grew by 16.9% thanks to the recovery in dining-out demand following the easing of social distancing. CJ OliveNetworks also saw a 37.2% increase in sales driven by the resumption of IT investments by its clients, leading to double-digit growth in CJ's consolidated sales and operating profit.

SK Securities' analysis suggests that CJ's major subsidiaries will benefit from the easing of social distancing. They expect a rebound in CJ Olive Young's offline sales due to relaxed distancing measures, and forecast improved performance for CJ OliveNetworks as corporate IT investments resume. CJ CGV and CJ Foodville are expected to experience a turnaround in performance due to increased movie attendance and dining-out demand.

Choi Gwansoon, a researcher at SK Securities, stated, "CJ Olive Young is preparing for listing after a free share issuance in March, but the recent IPO market sentiment is not favorable." However, he added, "With the strengthening of the omnichannel strategy (combining online and offline) after social distancing, performance improvement is expected to continue, highlighting the value of CJ's equity holdings."