[Click eStock] "CJ CheilJedang Expected to Miss Q1 Earnings Consensus"

On the 9th, Korea Investment & Securities forecasted that CJ CheilJedang's first-quarter earnings would fall short of market expectations. The investment rating of "Buy" and the target price of 370,000 KRW were maintained.

Korea Investment & Securities estimated CJ CheilJedang's first-quarter sales at 7.3461 trillion KRW, showing growth, and operating profit at 348.4 billion KRW. Sales increased by 1.8% compared to the same period last year, but operating profit decreased by 7.3% during the same period. Compared to previous market expectations, these figures are 1.2% and 10.9% below, respectively.

Researcher Kang Eun-ji of Korea Investment & Securities explained, "The domestic food business is expected to perform poorly with a slight decrease in sales compared to the same period last year," adding, "This is because sales of ingredients declined due to differences in the timing of Lunar New Year and sluggish dining-out conditions, despite the resumption of transactions with Coupang."

She also added, "The rise in the KRW-USD exchange rate has worsened the profitability of the domestic food business, and fixed costs in the Americas business increased due to production disruptions in the Americas dessert segment caused by natural disasters, which are also burdensome factors."

The bio business division's positive effects are expected to materialize in the second half of the year. The first-quarter bio business division's performance was estimated at sales of 1.0288 trillion KRW and operating profit of 75.9 billion KRW.

Researcher Kang said, "Due to the EU's anti-dumping regulations and the US tariff policies, CJ CheilJedang's lysine profitability, which has production facilities in the US, is expected to improve," but added, "However, intensified market competition for tryptophan, which has higher profitability than lysine, will deteriorate the overall profitability of the bio business division."

He stated, "From the second half of this year, we can expect an improvement in the bio business division's profitability due to a favorable base effect and a decrease in tryptophan supply volume. Gradual profitability improvement in the food business division is also expected due to the resumption of Americas dessert production and increased sales to high-margin countries," and concluded, "Going forward, the stock price is expected to rebound as overseas food business performance growth and bio business division profitability improvement become visible."