[Click eStock] "CJ CheilJedang, Prolonged Industry Slump... Target Price Lowered"

Target Price Lowered from 300,000 Won to 270,000 Won

On January 7, KB Securities reported that the prolonged downturn in industry conditions for CJ CheilJedang continues, and consequently lowered its target price from 300,000 won to 270,000 won. The investment opinion remains 'Buy'.

KB Securities researcher Ryu Eunae stated, "The downward revision of the target price is due to the reduction of the target multiple from 11 times to 9 times, reflecting the prolonged industry slump," adding, "While operating profit for the fourth quarter of last year is expected to meet market expectations despite ongoing challenges in both the food and bio sectors, we anticipate an improved business environment in the first quarter of this year, starting with the seasonal boost from the Lunar New Year holiday, easing exchange rate pressures, and growth in regions outside of North America."

KB Securities estimates that CJ CheilJedang's consolidated revenue for the fourth quarter of last year was 7.0514 trillion won, down 5.9% year-on-year, with operating profit at 300.9 billion won, a decrease of 22.7%. Ryu noted, "Including F&C, operating profit is expected to be 320.4 billion won, down 17.7%, which aligns with the consensus (the average forecast by securities firms) of 315.3 billion won." She analyzed, "Growth in food operating profit was likely limited due to domestic base effects and increased costs in North America, while the bio business continued to struggle as prices for major amino acids and high-margin products declined overall."

Regarding the sale of the F&C division, F&C results have been excluded from consolidated sales and operating profit since the fourth quarter of last year and are now classified as discontinued operations. Ryu explained, "With F&C results excluded from sales and operating profit, the growth of K-Food will become more prominent," adding, "In addition to the 10.9 billion won already received as advance payment for the sale, there is potential for further mergers and acquisitions (M&A) and financial structure improvement depending on the amount received through the earn-out method (additional payment upon meeting certain conditions)."