[Click eStock] CJ, CGV Rights Offering Lowers Investor Sentiment... Target Price Down 20%

NH Investment & Securities maintained a neutral investment rating on CJ on the 7th and lowered the target price by 20% to 76,000 KRW.

The company's second-quarter earnings are expected to fall below market expectations due to the poor performance of CJ CheilJedang. Sales are projected to grow 3% year-on-year to 10.6035 trillion KRW, but operating profit is expected to decline by 28% to 493 billion KRW during the same period. CJ CheilJedang is estimated to continue experiencing weak profitability due to consumer recession, base effects, high exchange rates, and rising raw material input costs following the first quarter. CJ Olive Young is believed to have maintained high growth through strengthening online presence and operational efficiency, while CJ Foodville is expected to have sustained the growth rate of its domestic dining business at the previous quarter's level.

Time is needed for stock price improvement. Dongyang Kim, a researcher at NH Investment & Securities, said, “Investment sentiment has deteriorated due to the sluggish performance of CJ CheilJedang, which has driven earnings momentum, as well as consecutive rights offerings by CJ CGV and the in-kind contribution of CJ Olive Networks.” He added, “After CJ CGV's rights offering, concrete results such as innovation in existing businesses and synergy with CJ Olive Networks are necessary.”

CJ Olive Young is expected to contribute to the holding company's cash flow through high growth and expanded dividend payments due to improved profitability, but the delay in its initial public offering (IPO) leaves uncertainties regarding timing and valuation, which is a burden. Researcher Dongyang Kim explained, “Although the target price has been lowered considering the stock price fluctuations of the listed subsidiaries, if CJ Olive Young's IPO is successful, the stock price could show an upward trend.”

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