[Click eStock] CJ Freshway, Strong Sales and Profitability 'Target Price Raised'

[Asia Economy Reporter Lee Seon-ae] Kiwoom Securities announced on the 14th that it maintains a buy rating on CJ Freshway and raises the target price to 50,000 KRW. This is due to the upward revision of earnings estimates.

Park Sang-jun, a researcher at Kiwoom Securities, explained, "Due to the recovery of the dining-out market, rising prices, and the reduction of remote work this year, CJ Freshway's operating profit is expected to increase by 51% compared to the previous year, demonstrating the highest profit growth rate within the food and beverage sector."

Fourth-quarter sales exceeded market expectations. In particular, sales in the food ingredient distribution sector were more than 5% higher than our forecast. Despite the resurgence of COVID-19, dining-out demand was more resilient than expected, and the sales increase effect due to price hikes in agricultural, marine, livestock, and processed products had a positive impact. The operating profit margin improved by +3.7 percentage points compared to the same period last year. Despite reflecting incentives, profitability greatly improved due to a combination of product price increases, improved profitability in group catering, and cost reduction effects.

First-quarter consolidated sales are expected to be 581 billion KRW (+6% YoY), and operating profit is forecasted at 10.6 billion KRW (OPM 1.8%, +1.2 percentage points YoY). With simultaneous increases in dining-out prices and demand recovery, overall sales and operating profit are expected to rise sharply.

CJ Freshway has typically recorded operating losses in January and February due to seasonal off-peak effects, but this year, thanks to cost reductions and strong demand, achieving a profit in January and February is expected to be smooth. Researcher Park emphasized, "As the first quarter is expected to achieve the highest performance ever, we have raised our 2022 operating profit forecast for the company by about +20%. The estimated price-to-earnings ratio (PER) for 2022 is projected to fall to 9 times."

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