[Click eStock] "CJ CheilJedang Unlikely to Avoid Earnings Decline in Q4... Target Price Lowered"

On November 12, IBK Investment & Securities lowered its target price for CJ CheilJedang from 310,000 won to 280,000 won, citing continued sluggish performance across all business divisions and noting that a meaningful recovery in the stock price seems unlikely for the time being. The investment opinion was maintained as 'Buy'.

In the third quarter, CJ CheilJedang's consolidated sales and operating profit were 7.4395 trillion won (+0.3% year-on-year) and 346.5 billion won (-16.7%), respectively, falling short of market expectations (7.6188 trillion won in sales and 375.3 billion won in operating profit). Amid underperformance in all business divisions, net profit for the period also declined by 43.8% due to reduced foreign exchange gains from a stronger exchange rate.

By division, food sales and operating profit stood at 2.984 trillion won (+0.4%) and 168.5 billion won (+4.5%), remaining at similar levels to the previous year. Kim Taehyun, a researcher at IBK Investment & Securities, stated, "Domestic sales decreased by 2.6% due to sluggish domestic consumption, weak sales of Chuseok gift sets, and reduced sales volume of soybean meal," adding, "Overseas sales (+3.7%) continued to face cost pressures from higher raw and subsidiary material prices, especially in the Americas, but operating margin improved slightly due to efforts to reduce selling and administrative expenses."

Bio sales recorded 979.4 billion won (-8.4%) and operating profit was 22 billion won (-71.9%). Kim explained, "Sales of specialty products such as arginine were weak due to intensified competition, and the expanded supply of Chinese products led to a decline in lysine prices," adding, "Tryptophan also continued to face deteriorating market conditions due to heightened competition." The Feed & Care division saw solid feed sales, but seasonal factors and weaker livestock prices caused by declining livestock demand in Vietnam negatively impacted results.

Fourth-quarter performance is also expected to follow a similar trend to the third quarter, making a decline in earnings inevitable. Kim projected, "The food division is likely to remain sluggish due to differences in the timing of the Lunar New Year holidays in Korea and rising manufacturing costs in the Americas," and added, "In bio, competition is expected to intensify with increased supply of Chinese products, and there is a high possibility that selling prices will continue to fall."

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