[Click eStock] "CJ, Target Price 140,000→125,000 Won... Reflecting Subsidiary Stock Price Decline"

CJ CheilJedang and ENM Reflect Decline, Target Price Lowered
Focus on Growth of Unlisted Olive Young and Foodville
Improvement in Unlisted Subsidiaries' Performance, CJ's NAV Discount Rate Expected to Decrease

On the 19th, SK Securities lowered the target price for CJ from 140,000 KRW to 125,000 KRW, reflecting the decline in the stock prices of its major subsidiaries. The investment rating of 'Buy' was maintained. CJ's closing price on the previous trading day was 90,000 KRW.

According to SK Securities, CJ recorded solid growth in its Q3 2024 earnings. Revenue decreased by 5.4% year-on-year to 10.8 trillion KRW, while operating profit increased by 35.3% to 674.8 billion KRW, resulting in an operating profit margin (OPM) of 6.2%. Major listed subsidiaries such as CJ CheilJedang (5.1%), CJ ENM (113.8%), and CGV (5.1%) showed stable operating profits, while unlisted subsidiaries Olive Young and Foodville led the performance growth.

CJ Olive Young's Q3 revenue was 1.2342 trillion KRW, with a net profit of 115 billion KRW, marking cumulative growth rates of 25.9% and 26.1%, respectively. Both online and offline sectors grew simultaneously due to offline store expansion and the high growth of the ‘Oneul Dream’ service, while overseas market expansion including the US and Japan accelerated, strengthening future growth potential. CJ Foodville also continued stable performance improvement with Q3 revenue and net profit increasing by 6.0% and 31.7%, respectively.

Notably, CJ Olive Young’s listing schedule was postponed following Glenwood PE’s stake sale, reducing the possibility of a discount on its equity value. Since there is almost no over-the-counter stock trading, the increase in Olive Young’s corporate value is expected to be fully reflected in CJ’s stock price.

Choi Gwan-soon, a researcher at SK Securities, said, "The target price downgrade reflects the stock price declines of major listed subsidiaries such as CJ CheilJedang (-36.1%) and CJ ENM (-31.9%). However, the continuous performance improvement of CJ’s unlisted subsidiaries is considered a key driver of increasing corporate value. As long as Olive Young and Foodville continue their growth trends, the discount rate relative to CJ’s NAV (Net Asset Value) is likely to gradually narrow."