[Click e-Stock] "CJ CheilJedang, Earnings Rebound Expected in Second Half"

1Q Results Fall Short of Market Expectations
Food Division Weak, Bio Division Sluggish

CJ CheilJedang posted lower-than-expected results for the first quarter of this year. This is attributed to weak profitability in both its food and bio divisions.

On May 14, Yuanta Securities lowered its target price for CJ CheilJedang by 5.4% to 350,000 won, citing these factors. The previous day's closing price was 238,500 won. The investment opinion of "Buy" was maintained.

In the first quarter of this year, CJ CheilJedang recorded consolidated sales of 7.2085 trillion won and operating profit of 333.2 billion won. Compared to the same period last year, sales decreased by 0.1% and operating profit fell by 11.4%. These figures were well below market expectations (consensus).

Excluding CJ Logistics, sales were 4.3625 trillion won and operating profit was 246.3 billion won. These represent decreases of 1.8% and 7.8%, respectively, compared to the same period last year. While the bio and feed & livestock division, Feed & Care (F&C), performed solidly, operating profit in the food division dropped by more than 30%, dragging down overall results.

The food division maintained top-line growth, mainly overseas, but profitability deteriorated significantly due to the shutdown of a dessert factory in the United States and sluggish domestic demand. Compared to the same period last year, sales increased by 3.3%, but operating profit decreased by 30.3%.

The bio division also saw sales and operating profit decline by 12.4% and 15.6%, respectively. However, the increased proportion of high-value-added products was viewed positively. In particular, profit from large-scale amino acids surged by 656% year-on-year. Analysts expect that additional price increases in the second half of the year will further benefit profitability.

The F&C division succeeded in turning a profit of 35.2 billion won, thanks to restructuring effects and strong pork prices in Vietnam. Even with stable grain prices, the division managed to maintain feed prices, and it is expected to remain profitable in the second quarter as well.

Son Hyunjung, a researcher at Yuanta Securities, explained, "Profit momentum depends on the normalization of profitability in the food division and the continued recovery of the bio division," adding, "If performance improvement becomes visible, there is room for a stock price rebound."