[Click eStock] "CJ, Concerns Over Olive Young's Negative Growth Are Excessive... Target Price Raised"

On April 23, Daishin Securities maintained its 'Buy' investment rating on CJ, stating that concerns over negative growth at its key subsidiary, CJ Olive Young, are excessive. The target price was raised by 3.4% from the previous level to 150,000 won.

Yang Ji-hwan, a researcher at Daishin Securities, explained, "There have been concerns that Olive Young's first-quarter sales may decline following reports that its first-quarter credit card transaction amount fell by 11% year-on-year. However, this figure does not include online and overseas transactions or sales to foreign customers." He added, "We estimate Olive Young's first-quarter sales to have increased by 9.1% year-on-year to 1.1775 trillion won."

Yang stated, "Olive Young recorded annual sales of 4.8 trillion won and net profit of 479 billion won in 2024. This year, we expect sales to reach 5.35 trillion won and the operating profit margin (OPM) to be in the 12-14% range." He further noted, "In particular, the sales growth rate in the second half of the year is expected to accelerate compared to the first half."

Regarding the potential merger between CJ and Olive Young, Yang commented, "Expectations for a merger are high as CJ and its related parties' stake in Olive Young will reach 100% due to Olive Young's share buybacks." However, he also assessed that "the possibility of a merger taking place in the near future is low."

CJ's consolidated results for the first quarter of 2025 are projected to record sales of 10.5857 trillion won and operating profit of 612.1 billion won, which is expected to fall slightly short of market expectations. This is attributed to sluggish performance at major consolidated subsidiaries such as CJ CheilJedang, CJ ENM, and CJ Logistics.

Yang assessed, "Given the expected pattern of a stronger first half and weaker second half this year, it would be effective to increase holdings during share price corrections in the first half."