[Click eStock] "CJ CheilJedang, Bio and Food Business Booming... Target Price Up 6%"

KB Securities Report

[Asia Economy Reporter Minji Lee] KB Securities maintained its investment rating as "buy" on CJ CheilJedang on the 10th and raised the target price by 6.4% to 500,000 KRW.

CJ CheilJedang's consolidated sales for the first quarter amounted to 6.9799 trillion KRW, a 13% increase compared to the same period last year. Operating profit was 435.7 billion KRW, growing 13% year-on-year and exceeding market expectations (394.8 billion KRW) by about 10.3%. Excluding Korea Express, sales increased by 17.6%, and operating profit rose by 6.6%.

By segment, food sales increased by 13%, but operating profit decreased by 3.8%. Although strategic products and growth channels continued to drive top-line growth domestically and internationally, operating profit declined due to increased cost burdens. The bio segment's sales and operating profit increased by 39% and 128.4%, respectively. KB Securities analyst Sunhwa Lee analyzed, "Amid favorable market conditions, the company maximized profits through strategic price increases based on market dominance and strengthened sales focused on high-margin regions." The F&C (feed) segment saw sales rise 6.6% due to feed price increases, but operating profit fell 78% due to the high base of Vietnamese hog prices and rising raw material costs.

The positive factors of strong bio and processed food price increases are expected to continue throughout the year. Analyst Sunhwa Lee explained, "Although raw material cost burdens are increasing due to global supply shortages, the company has market dominance that allows it to pass these costs onto selling prices," adding, "To stabilize the supply chain, inventory assets and working capital have been expanded, increasing net borrowings, but financial soundness can be maintained due to the higher profit levels."

Accordingly, operating profit growth estimates for this year and next year have been revised upward by 10.2% and 6.2%, respectively. The analyst said, "Due to global supply reductions and China's lockdown, the price of lysine (an essential amino acid used in livestock feed to strengthen muscles and cartilage) in China’s pig feed market is expected to remain high until the end of the year," and added, "The quarterly dividend was 100 KRW."

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