CJ CheilJedang Expected to See Faster Bio Profit Recovery... Target Price Raised [Click e-Stock]

Hana Securities Raises Target Price
from 300,000 Won to 370,000 Won

On May 20, Hana Securities maintained its “Buy” investment rating on CJ CheilJedang and raised its target price from 300,000 won to 370,000 won.

Shim Eun-joo, a researcher at Hana Securities, stated, “With the rapidly changing situation due to the ongoing war, the profit and loss in the bio sector is expected to recover more quickly than previously anticipated,” adding, “Given the upward trend in earnings, we believe it is an appropriate time to respond by buying.”

Shim assessed CJ CheilJedang's first-quarter performance this year as not bad. The company recorded sales of 7.1111 trillion won and operating profit of 238.1 billion won in the first quarter, which represent decreases of 1.4% and 28.5% year-on-year, respectively. Although the results were slightly below market expectations, Shim explained that there are signs of potential earnings improvement starting from the second quarter. In the bio business, sales increased by 10.4% year-on-year, as selling prices for key amino acids, including lysine, rose quarter-on-quarter, resulting in topline growth that exceeded market expectations. She said, “Given that the quarter-on-quarter increase in amino acid prices is expected to continue throughout the year, we anticipate a sharp recovery in performance from the first quarter low.”

Accordingly, she projected that the pace of improvement in the bio division’s profit and loss is faster than expected and estimated that the annual contribution to earnings could reach between 200 billion and 250 billion won. She explained, “We expect amino acid price hikes due to the war-driven rise in grain prices, CJ CheilJedang’s short- and medium-term benefits stemming from competitors’ methionine supply chain issues, and increased prices and sales volumes as North America, following Europe, imposes anti-dumping duties on Chinese lysine.” She added, “Additionally, the potential for increased lysine sales in the second half of this year due to recovering pork prices and consumption in China is also a positive factor, so we estimate that the bio division could contribute around 50 billion won in profit in the second quarter.”

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