Olive Young Boom: "CJ Expected to Post Record-Breaking Results" [Click e-Stock]

Securities analysts predict that CJ will achieve record-breaking results in the first quarter of this year, with its sales growth rate approaching 30%, thanks to the so-called "Olive Young effect."

On February 2, DS Investment & Securities researchers Kim Soohyun and Kang Taeho stated, "CJ is expected to benefit from the Hanilryeong effect and, with this year's Chinese New Year holiday being the longest ever at nine days, the company is likely to post its highest-ever results." They further analyzed, "The sales growth rate in the fourth quarter of last year is expected to remain around 25% year-on-year, and the sales growth rate for the first quarter of this year is projected to approach 30%."

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DS Investment & Securities raised its target price for CJ from 2.6 million won to 2.9 million won. One reason cited for the upward revision was the high proportion of foreign sales at Olive Young. Last year, foreign sales accounted for more than 25% of Olive Young's offline sales, estimated at 1.1 trillion won based on offline purchase value. This figure represents a 26-fold increase compared to the early days of the COVID-19 endemic in 2022. According to Global Tax Free, a tax refund company, 88% of domestic cosmetics purchases made by foreign visitors to Korea occurred at Olive Young.

The expansion of CJ's cosmetics distribution network is also seen as a positive factor. One of its new businesses, "Olive Better," attracted record crowds after opening its first store in Gwanghwamun. By partnering with Sephora, which has a global distribution network, CJ is expected to minimize initial fixed costs and maximize the speed of establishing its presence in overseas markets. They noted, "While the Pasadena flagship store in the United States is symbolically significant, leveraging thousands of Sephora stores worldwide will enable rapid sales growth in a short period," adding, "If this strategy succeeds, CJ could establish itself not just as a distributor but as a 'platform that selects brands with global appeal,' which is a highly positive development."

Meanwhile, the analysts noted that CJ could maximize its per-share net asset value by strategically retiring 22.5% of Olive Young's treasury shares, using the third amendment to the Commercial Act, which mandates treasury share cancellation, as an external rationale. Although the shareholder structure is complex due to special relationships, they added that the share cancellation is inevitable as it would increase the controlling shareholder's stake.

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