[Click eStock] "CJ CheilJedang, Slow Recovery in Investment Sentiment Amid Consumer Contraction... Target Price Down"

Target Price Lowered from 400,000 Won to 360,000 Won

On the 7th, IBK Investment & Securities downgraded the target price of CJ CheilJedang from 400,000 KRW to 360,000 KRW, citing slow recovery in investor sentiment due to prolonged consumer contraction. The investment rating was maintained as 'Buy.'

Kim Taehyun, a researcher at IBK Investment & Securities, stated, "This year's sales are expected to increase by 4.6% year-on-year to 30.7114 trillion KRW, and operating profit is projected to rise by 13.1% to 1.7516 trillion KRW. The expectation of improved profitability supports maintaining the buy rating." He added, "However, reflecting the lowered sector valuation due to domestic consumption slowdown, we adjusted the target price-to-earnings ratio (PER) from 12.8 times to 10.9 times, resulting in a downward revision of the target price."

CJ CheilJedang's fourth-quarter results last year are expected to fall short of market expectations. Researcher Kim said, "Consolidated sales for the fourth quarter are estimated to increase by 2.9% year-on-year to 7.5011 trillion KRW, and operating profit is expected to rise by 24.9% to 372.6 billion KRW, but operating profit will likely fall short of the consensus estimate of 394.5 billion KRW."

By segment, food sales are projected to increase by 3.3% to 2.8592 trillion KRW, with operating profit rising by 6.4% to 153 billion KRW. Kim explained, "Although domestic consumption contraction continued, domestic sales are expected to improve by 4.3% due to the resumption of direct transactions with Coupang and early sales of Lunar New Year gift sets." He added, "Overseas food sales are expected to grow by 2.4%, with modest growth in U.S. sales due to profitability-focused operations and continued decline in Chinese sales. On the other hand, as the inventory adjustment of Micho concludes, sales in Japan are improving, and Europe and Australia are expected to remain solid by increasing mainstream store entries."

Bio sales and operating profit are forecasted at 1.086 trillion KRW and 61.9 billion KRW, respectively, representing increases of 4.6% and 9.0% year-on-year. Kim said, "Although the improvement in lysine performance is not significant and competition in tryptophan has intensified, the poor performance last year acts as a base effect, enabling profitability improvement." He added, "The F&C segment will inevitably see a sales decline due to reduced feed sales volume, but operating profit is expected to turn positive by 10.5 billion KRW, driven by steady pork prices in Vietnam and broiler prices in Indonesia."