[Click eStock] "CJ Freshway, Fundamentally Stable... Clearly Undervalued Zone"

3Q Earnings Expected to Be Weak, but 4Q Outlook Bright
Current Stock Price Undervalued Considering Fundamentals

IBK Investment & Securities analyzed on the 26th that CJ Freshway's third-quarter earnings are expected to be sluggish, but the stock price is undervalued due to stable fundamentals. They maintained a 'Buy' rating and a target price of 48,000 KRW. CJ Freshway's closing price on the previous trading day was 18,540 KRW.

Nam Seong-hyun, a researcher at IBK Investment & Securities, stated, "Third-quarter earnings are expected to be driven by growth in the group catering division, but sluggishness in the dining-out industry is likely to constrain earnings growth due to a slowdown in sales from major clients." He added, "Top-line growth is expected to result from several factors, including expansion of clients due to reorganization of the sales team, increased meal counts and new orders leading to strong group catering performance, increased market share through online channels, and growth in the raw materials division."

According to IBK Investment & Securities, third-quarter sales are expected to reach 856.7 billion KRW (up 5.9% year-on-year), and operating profit is expected to be 31.2 billion KRW (up 3.3% year-on-year). However, due to a one-time cost of 24.5 billion KRW arising from a fine imposed by the Fair Trade Commission, ordinary profit is expected to be weak. Profit growth is likely to be limited due to increased cost burdens from proactive workforce expansion and higher fixed costs. Additionally, the impact of hospital strikes is expected to act as a factor restricting profits.

CJ Freshway's annual operating profit is estimated at 98.8 billion KRW. Although this is expected to slightly decrease compared to the previous year, the difference is not expected to be significant. Initially, record-high performance was anticipated this year, but profit growth appears challenging due to operational disruptions at some sites caused by medical strikes, stagnation in the dining-out industry due to consumer economic conditions, workforce expansion, and increased fixed costs.

Researcher Nam said, "However, there is a high likelihood that profit growth will resume from the fourth quarter," adding, "Continued sales growth in the raw materials division, the effect of expansion in the manufacturing division, and expected cost efficiencies are expected to have a positive impact." He also stated, "Concerns about profit growth in 2025 are limited, and considering CJ Freshway's substantial efforts to generate profits, a decline in corporate value is difficult to justify. Given the stable fundamentals, it is an undervalued area."

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