[Click eStock] "CJ CheilJedang, 1Q Earnings Disappoint... Expectations Should Be Lowered"

Hana Securities Report

Hana Securities diagnosed on the 9th that expectations for CJ CheilJedang's earnings should be lowered. The investment opinion of Buy and the target price of 620,000 KRW were maintained.

Sim Eun-joo, a researcher at Hana Securities, stated, "CJ CheilJedang's first quarter saw all business divisions facing a high base from the previous year, with F&C performing particularly poorly."

CJ CheilJedang recorded consolidated sales and operating profit of 7.0712 trillion KRW and 252.8 billion KRW, respectively, in the first quarter. Sales increased by 1.3% compared to the same period last year, but operating profit decreased by 42.0%, falling short of market expectations.

Combined domestic and overseas processed food sales increased by 5.8%. Domestic processed food sales decreased by 4.6% due to the timing of gift set reflections and economic slowdown. Overseas processed food continued high growth at 15.1%, with North America driving the performance.

Researcher Sim analyzed, "After the completion of the 'Schwan's' integration process at the beginning of the year, cost reduction effects in logistics and marketing have become visible, leading to an estimated improvement in operating margin."

Bio division sales fell sharply by 8.4%, and operating profit plummeted by 64.0%. Sim explained, "Following China's reopening, the short-term increase in COVID-19 cases led to weaker-than-expected demand for nucleic acids."

F&C (biological resources) recorded a large loss (-46.7 billion KRW). This was due to slower-than-expected recovery of pork prices in Vietnam and a sharp drop in broiler prices in Indonesia.

Researcher Sim judged that CJ CheilJedang's full-scale earnings recovery is likely in the second half of the year. He forecasted, "From the second quarter, the burden of grain input costs is expected to ease somewhat. Considering the effect of price increases, spread improvement will gradually become visible."

He added, "Overseas processed food costs are being resolved relatively faster compared to domestic costs. Operating margin improvement is expected to continue."

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