[Click e-Stock] "CJ's Share Price Should Better Reflect Olive Young Stake Value"

On August 18, Hana Securities raised its target price for CJ from 180,000 won to 190,000 won, stating that the company's current share price does not reflect the growing value of its stake in Olive Young. The investment opinion remains 'Buy'.

In the second quarter, CJ's consolidated revenue increased by 4.1% year-on-year to 11.1 trillion won, while operating profit decreased by 6.6% to 618.8 billion won. Choi Jungwook, a research analyst at Hana Securities, commented, "While operating profits of major listed subsidiaries were somewhat lackluster due to deteriorating profitability, Olive Young's performance significantly exceeded expectations, which was a notable factor."

Olive Young's revenue reached 1.46 trillion won, up 21.0% over the same period, far surpassing market expectations. In particular, offline inbound sales to foreign customers are estimated to have reached the 300 billion won range, accounting for 30% of total offline sales (1.025 trillion won). Choi noted, "If visa-free entry is granted to Chinese group tourists at the end of September, inbound sales to foreign customers are highly likely to surge going forward."

Olive Young's corporate value is estimated at 8.8 trillion won. Considering CJ's 51.2% stake, the value of CJ's share in Olive Young amounts to 4.5 trillion won. Choi stated, "Even applying a 30% discount to the stake value, it exceeds 3.1 trillion won, yet CJ's current market capitalization is only 4.3 trillion won," adding, "CJ's share price does not reflect the increasing value of its stake in Olive Young, and the sharp decline in share price following yesterday's earnings announcement is completely inexplicable."

CJ is also expected to benefit from policy measures currently being proposed in the political sphere, such as share buyback and cancellation, and separate taxation of dividend income. Choi said, "CJ holds 7.3% of its common shares as treasury stock, so depending on how the legislation develops, this could serve as a momentum driver," and added, "Given the company's policy of paying out more than 70% of net profit as dividends, CJ could become subject to separate taxation on dividend income."