[Click eStock] CJ CheilJedang, Excessive Stock Price Decline... "Strong Q3 Earnings Expected"

Hana Financial Investment Report
Q3 Operating Profit 360.9 Billion KRW... 32% Increase YoY

[Asia Economy Reporter Minji Lee] Hana Financial Investment maintained its buy rating and target price of 620,000 KRW for CJ CheilJedang on the 8th, judging that concerns about the third-quarter earnings are excessive.

Recently, CJ CheilJedang's stock price fell about 10% from a short-term peak. This was due to growing concerns that third-quarter earnings, the seasonal peak period, would be weak because of sluggish sales of Chuseok gift sets caused by the novel coronavirus disease (COVID-19). However, considering the external environment, the company is conservatively planning demand and responding to consumer needs in the gift set product lineup, so it is expected to deliver solid results in the third quarter as well.

Unlike in the past, the significant increase in online channel orders is also positive in terms of profitability improvement. Eunju Shim, a researcher at Hana Financial Investment, said, “Since the 'Social Distancing Level 2.5' has been implemented since the end of August, overall convenience food demand is expected to remain solid in the third quarter,” adding, “Sales and profit growth in the processed food sector will continue.”

In the third quarter, CJ CheilJedang is estimated to record consolidated sales of 6.2329 trillion KRW, a 6.4% increase compared to the same period last year. Operating profit is expected to increase by 32% to 360.9 billion KRW. Specifically, the overseas portion within the food sector rose to 48% in the second quarter, and margin improvement is beginning in earnest, which is positive. The bio sector has higher profit visibility than ever due to expanded sales of high-margin products. Researcher Shim explained, “The third quarter is expected to show strong results exceeding market expectations, continuing a trend similar to the second quarter,” and added, “In the feed sector, Vietnam pork prices are expected to remain above 60,000 VND in the third quarter, leading to a significant profit improvement compared to the same period last year.”

This year, the overseas portion within the food sector is expected to rise to 46%, up from 39% last year. Researcher Shim evaluated, “The expansion of footprints in both domestic and overseas processed food markets is positive,” and analyzed, “Considering the current stock price, the buy perspective remains valid.”

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