[Click eStock] "'Surprise Earnings' Repeated by CJ CheilJedang, Not a Coincidence"

Strong Performance in US Market... Bio Sector Also Shows Growth Trend

[Asia Economy Reporter Minwoo Lee] CJ CheilJedang posted strong earnings in the second quarter, significantly exceeding market consensus estimates. The company is expected to sustain performance growth going forward, driven by the impact of price increases in domestic processed foods and expansion in the U.S. market.

On the 10th, Daishin Securities maintained its 'Buy' rating and target price of 630,000 KRW for CJ CheilJedang, citing these factors. The previous day's closing price was 489,500 KRW.

CJ CheilJedang reported consolidated sales of 6.3092 trillion KRW and operating profit of 469.6 billion KRW for the second quarter of this year. These figures represent increases of 6.56% and 22%, respectively, compared to the same period last year. The operating profit also exceeded market expectations by 17.58%.

In overseas processed foods, despite a B2C (business-to-consumer) base burden, the expansion of B2B (business-to-business) sales channels for key products helped limit the decline to 4% year-on-year. Sales in the U.S. region, including Schwan’s, a frozen food company acquired in 2018, fell by only 2% in dollar terms compared to the same period last year. Sales in China and Japan increased by 5% and 51%, respectively.

Domestic processed foods saw a 7% recovery in sales compared to the same period last year, driven by continued growth centered on online channels and a recovery in B2B sales. Although the purchase price allocation (PPA) cost for Schwan’s was 8 billion KRW, down 12.3 billion KRW from the previous year, advertising expenses increased to establish the Bibigo brand and secure market presence for new products, resulting in a decrease in Schwan’s profit compared to the previous year. Excluding Schwan’s, improvements in overseas and domestic profit structures and the effect of price increases led to a 2.8% year-on-year increase in total food operating profit to 130 billion KRW.

The bio division recorded sales of 1.484 trillion KRW, up 21.5% year-on-year, driven by expanded market dominance of existing products, recovery in the Chinese pork market, and increased share of specialty sales. Operating profit also rose 42.7% year-on-year to 250 billion KRW, leading to a surprise strong performance.

Han Yujeong, a researcher at Daishin Securities, said, "While prices of major bio products are expected to decline after the second quarter, they will remain at high levels compared to last year and the average year. The impact of price increases in domestic processed foods and growth in the U.S. market will drive future earnings."

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