[Click eStock] "CJ CheilJedang, Excessive Undervaluation... Bottom Buying Effective"

[Asia Economy Reporter Kwon Jaehee] NH Investment & Securities maintained a 'Buy' rating on CJ CheilJedang on the 20th, setting a target price of 540,000 KRW.

CJ CheilJedang's consolidated sales for the fourth quarter are expected to be 7.7256 trillion KRW, with an operating profit of 307.1 billion KRW. Although this represents significant growth considering the one-time performance bonuses recorded in the same period last year, it is expected to fall short of market expectations.

In the food division, negotiations on delivery prices with some distributors such as Coupang and Lotte have been delayed, which is estimated to have a temporary negative impact on domestic processed food sales. However, this issue is not expected to prolong, and with overseas sales, led by the United States, continuing to show strong growth, a gradual recovery is anticipated.

The bio division is experiencing a downturn due to factors such as a decline in amino acid prices. Accordingly, a short-term drop in operating profit margin is inevitable. Going forward, whether profitability can be defended through an increased proportion of specialty products is expected to be a key variable affecting the stock price.

Researcher Joo Younghoon of NH Investment & Securities analyzed, "Even considering the short-term slowdown in earnings momentum, the current stock price is excessively undervalued at a price-to-earnings ratio (PER) of 7.4 times. Except for the sharp stock price drop at the beginning of COVID-19, this is the lowest level ever and is more than 20% lower compared to the food and beverage industry average (9.6 times)."

He added, "From an earnings perspective, a low-to-high trend is expected, so unless additional downward revision factors are found, this could be a time to buy at the bottom."