[Click eStock] CJ CheilJedang, Will It Benefit from the Price Increase?

[Asia Economy Reporter Hwang Junho] Kiwoom Securities maintained the target price for CJ CheilJedang at 560,000 KRW on the 28th, expecting improved earnings performance as the company raised prices of its main products due to rising costs of key raw materials. Kiwoom Securities estimates CJ CheilJedang's consolidated operating profit for the second quarter of this year at 471.6 billion KRW, slightly exceeding market expectations.

The main reason Kiwoom Securities kept the target price unchanged amid increased stock price volatility is the price hike. In the food business, the burden of rising raw material costs is expected to be offset by price increases of main products, leading to a slight increase in operating profit compared to the same period last year. In the bio business, an improvement in spread (Selecta) due to rising grain prices and a favorable market for feed amino acids driven by increased demand for alternatives are anticipated. In the F&C business, despite feed price increases and recovery in livestock prices, the burden of rising raw material costs is expanding, so profitability improvement compared to the first quarter is expected to be limited.

Park Sangjun, a researcher at Kiwoom Securities, stated, "Performance improvement centered on the bio sector is expected to continue in the second half of this year. Although the spot price of lysine in China has slightly declined compared to the beginning of the year, it still remains at a very high level compared to the past," adding, "Accordingly, the overall company’s performance improvement trend is expected to continue."