[Click e-Stock] "CJ CheilJedang Needs to Secure Earnings Visibility"

Regarding CJ CheilJedang, some analysts have commented that, although last year's results were in line with market expectations, there needs to be visible room for short-term earnings improvement.

On February 11, Park Sangjun, a researcher at Kiwoom Securities, stated about CJ CheilJedang's share price that "securing earnings visibility is the key." CJ CheilJedang's consolidated operating profit for the fourth quarter of last year was 295.9 billion won, which was in line with the market consensus. In the food segment, the company offset the negative impact from sluggish domestic sales volume and the timing difference of the holiday season by expanding sales of Global Strategic Products (GSP) in the Americas and Japan. However, due to the burden of rising raw material costs, profitability (operating margin) fell slightly by 0.2 percentage point compared with a year earlier. In the bio segment, despite an increase in sales volume of feed amino acids, profitability deteriorated due to a decline in selling prices of feed amino acids caused by increased supply from Chinese competitors.

Regarding this year's performance, Park projected that revenue would show low single-digit (1% to 3%) growth, while the operating margin would be similar to last year. He explained that, although the food segment continues to face the burden of rising raw material costs and negative foreign exchange effects at domestic subsidiaries, some protection of profitability appears possible through restructuring of underperforming domestic SKUs and expansion of overseas GSP sales. However, he added that the deterioration in the feed amino acid market due to increased supply from Chinese competitors remains a concern. In particular, considering the downward trend in Chinese spot prices for lysine and tryptophan, he noted that the bio segment's results in the first quarter of this year could potentially turn to a loss, stressing that "the strategy to improve the financial structure and mid- to long-term expectations for K-Food growth remain valid, but in the short term, whether earnings visibility in the bio segment can be secured will have a significant impact on the share price trend."

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