[Click eStock] "CJ CheilJedang, Need to Resolve Uncertainty in Bio Business... Target Price Down"

Target Price Lowered by 10% Compared to Previous Level

Daishin Securities on the 12th downgraded the target price for CJ CheilJedang from 390,000 KRW to 350,000 KRW, stating that resolving uncertainties in the bio business is necessary for the stock price to rise. The investment opinion was maintained as 'Buy.'

Jung Hansol, a researcher at Daishin Securities, explained, "We lowered the target price by revising down the bio business performance estimates, considering the possibility of deteriorating bio results due to the decline in prices of high-margin specialty products that led to strong bio business performance in the first half of 2024. Currently, the stock price is at a price-to-earnings ratio (PER) of about 8 times, which offers sufficient valuation appeal, but we expect the stock price to rise after uncertainties in the bio business are resolved."

CJ CheilJedang's Q4 results last year recorded sales of 4.475 trillion KRW excluding Hanjin Transportation and an operating profit of 219.9 billion KRW, representing increases of 2% and 39% respectively compared to the same period last year. Researcher Jung analyzed, "Operating profit fell short of the consensus estimate (average of securities firms' forecasts) of 238.8 billion KRW due to a one-time performance bonus of 20 billion KRW being reflected, and net profit turned to a loss due to recognition of impairment losses on tangible and intangible assets amounting to 253.3 billion KRW as non-operating expenses."

Domestic processed foods shrank by 1% due to consumption slowdown despite early shipment of Lunar New Year gift sets and the resumption of transactions with Coupang. Overseas food sales increased by 7%, but in the Americas, sales growth in dollar terms was limited due to production disruptions of desserts caused by a tornado in December, and profitability declined compared to the same period last year due to increased fixed costs. Researcher Jung stated, "However, due to the exchange rate effect, sales in KRW terms grew by 6%, and sales volumes of key products such as pizza and dumplings were steady." Europe and Australia continued high growth due to expansion of global strategic products (GSP) into mainstream channels, and Japan turned to growth after seven quarters as inventory adjustments ended and GSP sales including dumplings recovered.

The possibility of performance deterioration due to domestic consumption contraction is limited. Researcher Jung said, "Although there are concerns about domestic food consumption contraction, performance deterioration is limited as growth centered on online channels is expected due to the resumption of transactions with Coupang. Overseas food is expected to show solid performance based on steady market share in the Americas, accelerated entry into mainstream channels in new regions such as Europe and Australia, and sales growth in Japan."