[Click eStock] "CJ CheilJedang, Solid Q4 Performance... Expecting Improvement in Bio Segment Results"

Target Price Maintained at 390,000 KRW

Daishin Securities maintained a 'Buy' investment rating and a target price of 390,000 KRW for CJ CheilJedang on the 20th, expecting solid performance in the fourth quarter of last year.

Jeong Hansol, a researcher at Daishin Securities, stated, "Excluding CJ Logistics, CJ CheilJedang's sales in the fourth quarter of last year are expected to reach 4.5053 trillion KRW, a 3% increase from the previous year, and operating profit is projected to be 231.2 billion KRW, a 46% increase year-on-year."

Domestic food sales are expected to remain at the previous year's level. Processed foods are anticipated to grow by 4% year-on-year despite domestic consumption contraction, due to early shipment of Lunar New Year gift sets and the resumption of transactions with Coupang. In the materials segment, although the decline in sales is expected to slow compared to the previous quarter due to the gift set effect, it is still forecasted to experience negative growth.

Overseas food sales are projected to increase by 5% year-on-year. In the Americas, sales growth in dollar terms was limited due to profitability-focused operations, but growth was achieved year-on-year thanks to currency effects, with profitability estimated to have improved compared to the previous quarter. Europe and Oceania maintained strong growth as the expansion of Global Strategic Products (GSP) continued, and sales in Japan are also expected to recover. However, China is expected to continue negative growth despite the base effect from the divestment of Zhongsu.

In the bio sector, sales are forecasted to increase by 4% year-on-year due to a base effect from the recovery of Selecta's market conditions, with operating profit expected to rise by 31% year-on-year. However, profitability is anticipated to decline compared to the previous quarter due to intensified competition in some high-margin products.

Feed and livestock (F&C) sales are expected to increase by 2% year-on-year, with operating profit turning positive, driven by higher pork prices in Vietnam compared to the previous year.

Researcher Jeong analyzed, "The current stock price is at a price-to-earnings ratio (PER) of about 6.6 times, reflecting concerns over performance deterioration this year." Although there are concerns about domestic consumption contraction, domestic processed foods are growing mainly through online channels due to the resumption of transactions with Coupang. Overseas, steady market share in the Americas and accelerated entry into new mainstream markets in Europe and Oceania are expected to sustain growth centered on Western markets. The bio sector is evaluated to have potential for performance improvement, considering the benefits from the European anti-dumping trade dispute on Chinese lysine and the possibility of lysine price rebound due to China's economic recovery.