[Click e-Stock] "CJ: Olive Young IPO Risk Resolved... Target Price Raised"

On March 19, Hana Securities raised its target price for CJ to 240,000 won and maintained its "Buy" rating, judging that uncertainties related to the initial public offering (IPO) of its subsidiary, Olive Young, have been resolved.

Choi Jungwook, an analyst at Hana Securities, explained, "The reason for the target price increase is that we have removed the discount on equity value, as we believe the risk associated with the Olive Young IPO has completely disappeared." He also pointed out that, given the current government's policy stance, it has become more difficult for subsidiaries to be listed simultaneously, and the market is therefore giving more weight to the possibility of a merger between CJ and Olive Young.

Analyst Choi added, "Under the revised Commercial Act, 7.3% of CJ's treasury shares and 22.6% of Olive Young's treasury shares must be canceled within 18 months. Therefore, I believe that at least in the first half of next year, there is a high likelihood that a restructuring of the governance structure will take place in conjunction with the treasury share cancellation." He continued, "If Olive Young is merged, CJ, as an operating company, will be able to fully benefit from Olive Young's profits, and net debt can also be reduced rapidly. This suggests a positive long-term outlook for the share price."

In the fourth quarter of last year, CJ's consolidated revenue increased by 1.6% year-on-year to 11.4 trillion won, and operating profit rose by 13.6% to 712.3 billion won. Among its major listed subsidiaries, CJ CheilJedang's operating profit saw a significant decrease (down 15.0% year-on-year), but operating profits at CJ Logistics, CJ ENM, and CJ CGV improved.

The performance of unlisted subsidiary CJ Olive Young is expected to exceed market expectations this year. In the fourth quarter of last year, Olive Young's revenue grew by 31.6% year-on-year to 1.58 trillion won, driven by growth in online sales. Offline sales decreased by 1% quarter-on-quarter, as the number of stores fell due to closures such as Homeplus. Analyst Choi stated, "However, due to the effect of the Lunar New Year holiday in February, inbound sales from Chinese visitors in the first quarter are expected to increase significantly. Looking ahead, global mall sales are also expected to grow substantially, driven by the opening of stores in the United States and the effect of entering Sephora's stores. As a result, CJ Olive Young's performance improvement trend is expected to continue."

CJ Foodville is also expected to see its operating profit margin rise to around 7%, with the completion of the Georgia dough plant at the end of the year and an increase in overseas stores. Analyst Choi noted, "In the fourth quarter of last year, global bakery revenue was 45 billion won, which represents growth of 23% quarter-on-quarter and about 50% year-on-year." He added, "With the rapid growth of the highly profitable global bakery business, annual operating profit of around 50 billion won should be readily achievable, despite continued investment in personnel and organization to accelerate franchise expansion."

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