[Click eStock] "CJ, Target Price Lowered to 140,000 Won... Adjustment of Subsidiary Discount Rate"

On the 15th, SK Securities lowered CJ's target stock price from 160,000 KRW to 140,000 KRW. The investment rating was upgraded to Buy.

For the second quarter, sales are expected to reach 10.9534 trillion KRW and operating profit 656.9 billion KRW. An increase in operating profit is anticipated from major listed subsidiaries such as CJ CheilJedang and CJ CGV, along with a turnaround to profitability for CJ ENM. The unlisted subsidiary CJ Olive Young is expected to continue its high growth trend with sales and net profit increasing by 21.6% and 10.3%, respectively. CJ Foodville is also projected to drive improvements in CJ's consolidated results, with sales and net profit rising by 21.3% and 13.9%, respectively, influenced by the expansion of overseas stores. Overall, solid results exceeding operating profit consensus are anticipated.

For 2024, CJ Olive Young's performance is forecasted with sales of 4.781 trillion KRW and net profit of 418.6 billion KRW. Growth in offline store sales per location and the launch of new online services such as Health Plus are expected to sustain top-line growth, while operational efficiency improvements are projected to enable net profit growth. Considering over 20% top-line growth and net profit in the 400 billion KRW range, the company’s valuation is expected to be higher than the approximately 3.5 trillion KRW valuation at which Glenwood PE recently sold it. Choi Gwan-soon, a researcher at SK Securities, stated, "Although nothing has been finalized yet, if listing, merger, or stock exchange involving CJ Olive Young materializes, it could contribute to an increase in CJ’s net asset value (NAV)."

The investment rating for CJ was upgraded to Buy. Despite the recent NAV increase, the CJ stock price has declined, creating a price merit. However, the target price was lowered from 160,000 KRW to 140,000 KRW due to adjustments in the discount rate applied to subsidiary valuations. Researcher Choi said, "The 140,000 KRW target price is only 12.5 times CJ Olive Young’s expected 2024 net profit, so if corporate value is realized through listing, merger, or stock exchange, there is potential for further target price increases." It is expected that the value of CJ Olive Young will be prominently recognized when interest rates decline in the second half of the year.