[Click eStock] Ready Meals Taking Over Dining Tables... CJ CheilJedang's 1Q Operating Profit Up 54% YoY

Operating Profit Increased by Over 50% Year-on-Year Even Excluding CJ Logistics
New Ready-to-Eat Food Consumption Rises Since COVID-19... Growth Expected in Q2 as Well

[Asia Economy Reporter Minwoo Lee] CJ CheilJedang posted first-quarter earnings that exceeded market expectations. This is attributed to the influx of new consumers of convenience foods since the COVID-19 pandemic, along with better-than-expected profitability improvements in the bio resources division.

On the 15th, Kiwoom Securities maintained a 'Buy' rating on CJ CheilJedang and raised the target price from 350,000 KRW to 410,000 KRW. The closing price the previous day was 301,000 KRW. This decision was based on the solid first-quarter performance and the expectation that growth will continue.

In fact, CJ CheilJedang recorded consolidated sales of 5.8309 trillion KRW and operating profit of 275.9 billion KRW in the first quarter of this year. These figures represent increases of 16.2% and 54.1%, respectively, compared to the same period last year. Excluding CJ Logistics, the performance was also strong, with sales rising 23.9% year-on-year to 3.4817 trillion KRW and operating profit increasing 53.3% to 220.1 billion KRW.

In particular, the improvement in processed food profitability was significant. Despite a decrease in B2B channel sales of cash-generating core products such as Dasida and sauces, and gift set sales being reflected in the fourth quarter of last year, processed food operating profit rose 29.2% year-on-year to 99.2 billion KRW due to increased consumer demand for convenience foods after COVID-19. The influx of new consumers who had not previously consumed home meal replacements is also seen as a positive factor.

Park Sang-jun, a researcher at Kiwoom Securities, explained, "As more people have been exposed to convenience foods, opportunities to attract new customer segments have arisen. By pioneering various submarkets such as Hetbahn, Cupbap, Bibigo soup dishes, and dumplings, and leveraging superior quality compared to competitors, CJ CheilJedang has already established a foundation to simultaneously grow sales and profits in the future."

The bio division also performed well. Despite sluggish demand for feed additives due to the African Swine Fever (ASF) impact, increased sales of high-margin products such as tryptophan, valine, and arginine minimized the decline in operating profit (a decrease of 1.3 billion KRW year-on-year). Additionally, a gain of 528.2 billion KRW from the sale of the Gayang site was reflected, resulting in a 985% increase in net income attributable to controlling shareholders compared to the previous year.

Most business units are expected to continue growing in the second quarter. For processed foods, positive factors include ▲strong demand for convenience foods driven by new consumer inflows post-COVID-19 ▲efficiency improvements in promotional expenses and rationalization of the number of SKUs in stores. In bio, the recent price increases of feed additives such as lysine and tryptophan are expected to raise the average selling price (ASP) compared to the first quarter, along with a rebound in nucleic acid demand from China as COVID-19 impacts ease. Sales of specialty new products like arginine are also expected to increase. However, in the material foods segment, rising raw material costs due to increases in the KRW-USD exchange rate and wheat prices are anticipated to reduce profitability.

This content was produced with the assistance of AI translation services.