[Click eStock] CJ CheilJedang's Q2 Performance Remains Strong... All Business Divisions Show Improvement

[Asia Economy Reporter Lee Seon-ae] Kiwoom Securities announced on the 23rd that it maintains a 'Buy' investment rating and a target price of 650,000 KRW for CJ CheilJedang, supported by the company's solid performance.

CJ CheilJedang's consolidated 2nd quarter sales and operating profit are expected to be 6.3 trillion KRW (+6% YoY) and 408.3 billion KRW (+6% YoY), respectively, in line with market consensus (excluding Hanjin Transportation, sales are forecasted at 3.62 trillion KRW and operating profit at 312.6 billion KRW). The 2nd quarter of last year had a low base due to the surge in home dining demand amid the COVID-19 spread and a rebound benefit from logistics disruptions of amino acid competitors. Despite the low base effect and rising raw material input costs in the materials food sector this year, overall performance is expected to slightly increase YoY, supported by efficiency improvements in processed food promotions, strong demand for feed amino acids, and favorable livestock market conditions in Vietnam and Indonesia.

In the second half, the price increase effects of processed foods implemented in the first half are expected to gradually appear. Domestically, price hikes are anticipated in sauces, seasonings, Hetbahn (ready-to-eat rice), and canned ham, while in the U.S., price increases are expected in pizza and desserts. Additionally, as higher grain prices from the 2nd quarter are reflected in raw material costs, the materials food division's performance is being affected, and price increases for domestic materials food products are expected to begin from the 3rd quarter. The global food business plans to focus on expanding sales centered on dumplings and chicken. In the U.S., Costco MVM events have resumed, and the entry rate of Korean-style chicken (frozen food) at Kroger is increasing. In China, a new dumpling factory is scheduled to start operations in the second half of next year.

The bio division requires attention to the rebound in demand for nucleic acids and SPC (concentrated soy protein). CJ CheilJedang is the market leader in global nucleic acid and SPC markets. However, due to weak dining-out demand caused by the COVID-19 spread and shipment delays from logistics disruptions, sales of nucleic acids and SPC have been relatively sluggish. Recently, with rising vaccination rates, dining-out demand in China and Europe is gradually recovering, and salmon aquaculture demand (a front industry for SPC) is also recovering, so the second half is expected to see an improved operating environment compared to the first half.

Researcher Park Sang-jun of Kiwoom Securities stated, "With price pass-through power demonstrated across all CJ CheilJedang business divisions, combined with the expansion of the global food business and the rebound effect in nucleic acid and SPC demand, performance improvement is expected to continue."

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