[Click eStock] "CJ CheilJedang to Meet 3Q Earnings Expectations... Recommended for Bargain Buying"

[Asia Economy Reporter Myunghwan Lee] Hana Securities announced on the 22nd that it maintains a buy rating and a target price of 620,000 KRW for CJ CheilJedang. The company also expects CJ CheilJedang to deliver strong third-quarter results that meet market expectations.

Hana Securities forecasts CJ CheilJedang's consolidated third-quarter sales to grow 10.4% year-on-year to 7.5683 trillion KRW, with operating profit increasing 18.4% to 513 billion KRW. Excluding the logistics division, sales and operating profit are projected at 4.7558 trillion KRW and 404 billion KRW respectively, representing increases of 12.6% and 25.4% compared to the same period last year.

Hana Securities expects CJ CheilJedang to continue delivering strong performance in the third quarter following the second quarter, meeting market expectations. By business segment, domestic processed food sales are expected to achieve double-digit growth year-on-year, driven by price increases and rising market share of strategic products. Overseas processed food sales are also forecasted to maintain high growth, supported by price hikes and balanced sales expansion across the Americas, Asia-Pacific, and Europe. The U.S. food subsidiary 'Schwan's' is analyzed to achieve around 20% sales growth. Although cost pressures remain, Hana Securities believes that through cost structure optimization, domestic and overseas processing margins will be maintained at last year's levels.

In the bio sector, Hana Securities expects a decline in profits compared to the previous quarter due to recent amino acid price drops, but anticipates continued profit growth compared to the same period last year. The bioresources segment is also expected to see significant profit increases compared to both the previous quarter and the same period last year.

Hana Securities' assessment is that there is no major concern regarding CJ CheilJedang's performance next year. The company projects next year's consolidated sales and operating profit at 30.7521 trillion KRW and 2.0082 trillion KRW respectively, representing increases of 4.7% and 12.4% year-on-year. Excluding the logistics division, sales and operating profit are expected to grow by 6.3% and 9.7% respectively.

Food business is expected to show meaningful profit leverage in the second half of the year. Cost burden relief and overseas promotional efficiency improvements are anticipated to improve margins by 2.1 percentage points in materials and 1.2 percentage points in processing, according to Hana Securities. However, the bio sector is expected to face inevitable profit declines considering amino acid price trends. Nonetheless, given that the food business sales scale is twice that of the bio business, the bio profit decline is expected to be offset.

Researcher Eunju Shim of Hana Securities advised, "The current stock price is only 8 times the 12-month forward price-to-earnings ratio (PER). We recommend buying at this low price."