[Click e Stocks] "CJ CheilJedang, H2 Earnings Recovery Expected"

First-Half Performance Falls Short of Expectations

LS Securities forecasted on the 17th that CJ CheilJedang's first-half performance would fall short of expectations due to consumption slowdown and tariff impositions. However, they anticipated a recovery in performance starting from the second half of the year. Accordingly, they maintained a 'Buy' investment rating and a target stock price of 370,000 KRW.

Park Seong-ho, a researcher at LS Securities, explained, "Amid unstable domestic and international business environments, earnings expectations for the food and beverage sector as a whole are being revised downward for the first half. The imposition of tariffs by the United States will also act as a negative factor within the industry."

CJ CheilJedang's first-quarter sales excluding CJ Logistics were expected to increase by 1.8% year-on-year to 4.5224 trillion KRW. Operating profit was estimated to decline by 4.8% to 254.3 billion KRW, falling short of market consensus. Researcher Park analyzed, "The domestic food segment saw a decrease in sales volume due to the consumption slowdown continuing since the second half of last year. However, the increase in the proportion of online sales partially offset the overall decline."

Regarding the overseas food segment, he added, "Global strategic products (GSP) such as Bibigo continued steady growth, but sales of frozen pizza in the Americas slowed due to a high base effect. The increase in fixed costs from maintenance work at the U.S. dessert factory also acted as a burden on performance." On the other hand, the recovery in China and Japan, along with the expansion of mainstream products in new countries such as Europe and Australia, was evaluated as a positive factor.

The bio segment was also expected to experience a performance downturn in the first quarter. Sales in the bio business division for the first quarter were projected to increase by 0.5% year-on-year to 1.0267 trillion KRW, while operating profit was expected to decrease by 21.3% to 77 billion KRW.

Researcher Park noted, "The favorable market conditions for tryptophan in the same period last year will be a burden, leading to a decline in profit in the first quarter this year. The adverse market conditions caused by the supply expansion of major amino acids in the fourth quarter of last year are also expected to continue through the first quarter."

However, a performance rebound possibility was raised from the second quarter. Benefits were expected from changes in U.S. and European tariff policies on lysine imported from China. Park evaluated, "CJ CheilJedang has a local production system in the U.S. for both food and bio sectors, placing it in a favorable position compared to competitors, so it is expected to recover from the first-half slump in the second half."