[Click eStock] "CJ CheilJedang, Despite Low Base Effect... Positive Outlook for Domestic Food Business"

The Effect of Major Product Price Increases Expected to Appear Starting Q2

[Asia Economy Reporter Gong Byung-sun] CJ CheilJedang, which benefited from COVID-19, is facing a potential base effect, according to an analysis. However, growth is expected in the domestic food business, which is anticipated to offset this. Accordingly, IBK Investment & Securities maintained a target price of 520,000 KRW and a 'Buy' rating for CJ CheilJedang.

On the 19th, IBK Investment & Securities explained that CJ CheilJedang may face a base effect this year due to the easing of COVID-19. Last year, CJ CheilJedang's home meal replacement (HMR) segment stood out amid the pandemic, as movement restrictions increased the number of 'home meal' consumers. In particular, overseas sales in the food business surged by 31%. However, with the expansion of domestic and international vaccination, COVID-19 is expected to ease. Kim Tae-hyun, a researcher at IBK Investment & Securities, predicted, "A base effect will occur, reducing the growth rate of performance compared to last year."

Nevertheless, slight external growth is expected as the domestic food business continues to perform well. Researcher Kim analyzed, "It has been identified that demarketing, a marketing method that reduces customer purchases of ingredient foods domestically, and a decline in business-to-business (B2B) demand are ongoing. However, sales of gift sets are increasing, and frozen and convenience foods such as dumplings and Hetbahn continue to show strong sales." Additionally, considering the inventory levels of distributors, the effect of price increases on major products like Hetbahn is expected to appear from the second quarter.

The outlook for the overseas food business was mixed. Although growth in regional food sectors such as pickled and fermented products slowed in the Chinese market, sales of dumplings and ambient HMR are on the rise. Accordingly, IBK Investment & Securities forecasts approximately 10% year-on-year sales growth in the Chinese market. On the other hand, in the U.S. market, considering the base effect in retail in March and exchange rate burdens, sales are expected to remain at last year's level.

The bio sector is expected to grow. Sales performance of feed additives is projected to improve due to rising prices and improved dining-out demand centered on China. CJ F&C, which handles feed and livestock sectors, is maintaining performance at the level of the first quarter of last year due to stable pork prices in Vietnam and rising broiler prices in Indonesia, so the burden of the base effect is expected to be minimal.

Reflecting this, IBK Investment & Securities maintained the target price at 520,000 KRW. Researcher Kim said, "Consolidated sales and operating profit this year are expected to grow by 4.9% and 7.5%, respectively, compared to the same period last year."

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