[Click eStock] "CJ CheilJedang, First Half Earnings Concerns Already Priced In"

Hana Securities has issued a 'Buy' rating and a target price of 620,000 KRW for CJ CheilJedang.

Hana Securities believes that CJ CheilJedang's stock price has already priced in concerns over first-half earnings. The stock price has fallen 20% compared to the end of last year, currently trading at a 12-month forward price-to-earnings ratio (PER) of 6 times, which is at the lower end of its historical band.

Sim Eun-joo, a researcher at Hana Securities, analyzed, "Firstly, the decline in domestic processed food volume seems exaggerated. Looking at past cases in developed countries, the market share of the leading company has remained solid, and negative impacts from price resistance affected the market share of companies with weaker brand power."

She added, "The volume decrease in the second half of last year was more likely due to the suspension of orders to Coupang rather than price resistance."

Since the bio division's profit decline this year was already anticipated from last year, from a mid- to long-term perspective, the bio business unit's profit visibility has significantly improved compared to the past. The increased proportion of high-margin amino acids and production efficiency improvements have also raised expected margins, which is positive for the overall corporate strength.

However, Hana Securities forecasts that grain prices will stabilize and decline starting from the second quarter. Researcher Sim added, "Even looking at futures prices, the possibility of grain price increases in the second half seems low."

Accordingly, CJ CheilJedang's consolidated sales and operating profit for this year are estimated at 31.3397 trillion KRW and 1.7512 trillion KRW, respectively.

Researcher Sim stated, "Although there is a possibility of earnings adjustments depending on the speed of grain price and exchange rate declines, meaningful performance continues in the second half, and CJ CheilJedang remains the dominant player domestically. Attention should be paid to the fact that overall corporate profits have more than doubled over the past three years as bio profit visibility has increased."