[Click eStock] CJ Freshway, Will Meal Service Growth Continue Amid Logistics Investment Costs?

Hyundai Motor Securities announced on the 25th that it maintains a Buy rating and a target price of 46,000 KRW for CJ Freshway. The current stock price is at a price-to-earnings ratio (PER) of 5.6 times based on 2023, indicating a low valuation burden.

Heeji Ha, a researcher at Hyundai Motor Securities, stated, "Although profitability relative to scale is somewhat disappointing due to increased logistics infrastructure investment costs in the first half of the year, we expect the operating environment in the second half to improve compared to the first half, as growth in scale and profitability centered on meal service channels continues and SG&A expenses improve with increased logistics center utilization in the second half."

The second quarter is expected to record results slightly below market consensus. Consolidated sales for the second quarter are projected to be 804.7 billion KRW, an 11.6% increase year-over-year, while operating profit is expected to decrease by 5.1% to 32.8 billion KRW. While topline growth centered on group meal services is encouraging, the decline in profitability is attributed to the burden of logistics infrastructure investment costs in the food ingredient distribution segment.

Meanwhile, in the food ingredient distribution segment, group sales growth is anticipated. Although growth has slowed compared to last year due to a slowdown in the dining-out market, the dining-out sector is still expected to grow year-over-year. The primary product wholesale and raw material segments are expected to remain sluggish in the second quarter following the first quarter. Researcher Ha explained, "Profitability in the food ingredient distribution segment is expected to decline somewhat in the second quarter due to increased logistics infrastructure investment costs. However, in the second half, gradual coverage of fixed costs will be possible through inventory clearance in the primary product wholesale and raw material segments and improved logistics center utilization."

For group meal services, continued growth in meal service orders and high sales growth are expected. Researcher Ha said, "A clear improvement in performance will be evident," adding, "Double-digit growth in scale in the group meal service segment is likely to continue in the second half as well."

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