[Click e-Stock] "CJ CheilJedang Expected to Continue Weak Performance in Food and Bio Divisions"

On September 30, Hana Securities lowered its target price for CJ CheilJedang from 380,000 won to 350,000 won, citing the inevitable deterioration in the bio division's profitability due to continued sluggish domestic consumption and intensified competition in lysine and specialty products. The investment opinion remains 'Buy'.

CJ CheilJedang's consolidated sales and operating profit for the third quarter of this year are estimated at 7.555 trillion won (+1.9% year-on-year) and 355 billion won (-14.7% year-on-year), respectively. Excluding logistics, consolidated sales and operating profit are expected to be 4.6187 trillion won and 220 billion won, respectively, slightly below market expectations.

Shim Eunju, a researcher at Hana Securities, stated, "Domestic processed food sales are expected to remain at last year's level," adding, "With limited top-line growth due to sluggish domestic demand and ongoing cost pressures from pork, rice, and other raw materials, the trend of declining profitability compared to the same period last year is likely to continue in the third quarter."

During the same period, overseas processed food sales are expected to increase by around 4.0%. Shim noted, "The resumption of dessert line operations in the Americas and strong growth in Europe and Australia appear to be key drivers," and predicted, "Thanks to the recovery of the top line in the Americas, where sales are relatively large, operating margins are also expected to improve slightly."

The bio division is expected to see declines in both sales and operating profit. Shim pointed out, "The anti-dumping tariff rate on Chinese lysine in Europe has been set lower than expected, which seems to have led to a renewed influx of Chinese products," and also identified intensified competition in specialty products (such as alanine and arginine) as a burden.

Shim added, "If the current domestic and global business environment continues through the end of the year, a slight decrease in earnings compared to the same period last year in the fourth quarter will be inevitable." However, she explained, "From the fourth quarter of this year, we can expect a reduction in cost pressures for the food and bio divisions due to falling grain input prices, as well as stabilization in the major amino acid market driven by additional domestic stimulus measures from the Chinese government next year."

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