[Click e-Stock] "CJ CheilJedang Needs Caution on Downside Risks... Target Price Lowered"

Target Price Lowered from 250,000 Won to 210,000 Won

On January 14, Hanwha Investment & Securities stated that caution is needed regarding downside risks for CJ CheilJedang, and lowered its target price from 250,000 won to 210,000 won. The investment opinion was maintained as 'Neutral'.

Han Yoojeong, a researcher at Hanwha Investment & Securities, explained, "We are lowering the target price due to a downward revision of earnings estimates," adding, "In the short term, despite the defensive nature of the food division, underperformance in the bio division is likely to limit earnings improvement. The bio business faces uncertain timing for price recovery, and caution is required regarding downside risks until the supply glut from China is resolved."

CJ CheilJedang's fourth-quarter results last year are expected to fall short of market expectations. Han stated, "Excluding CJ Logistics, fourth-quarter sales are expected to decrease by 12.6% year-on-year to 3.9106 trillion won, and operating profit to drop by 42.5% to 126.3 billion won, falling short of the consensus operating profit of 156.4 billion won." She analyzed, "While sales in the Americas grew by 5.5% due to expanded distribution following the normalization of dessert production, domestic food sales declined due to the timing difference of the Lunar New Year holiday, and bio sales also declined due to price drops." Profitability for the entire business is estimated to have decreased year-on-year, due to reduced volume for domestic food, higher key raw material costs for overseas food, and price declines for the bio division.

The recovery of the bio business division is likely to be delayed. Han noted, "Despite the imposition of final tariffs by Europe on Chinese lysine, competition and increased supply are intensifying across major bio products such as lysine and tryptophan. Even amid oversupply, Chinese companies appear to be expanding production. Ultimately, this issue will only be resolved when third-party companies exit the market, making a recovery in the bio business division likely to be delayed."