Target Price Lowered by 6%: “Shinhan Investment Corp predicts that CJ CheilJedang’s performance this year will exhibit a pattern of low performance in the first half and higher in the second half. The target price has been adjusted down from 340,000 won to 320,000 won, but the investment rating remains as a ‘buy’.”
Researcher Cho Sang-hoon from Shinhan Investment Corp stated, “In light of the prolonged consumption slump affecting domestic performance estimates, we have reduced the target price by 6%. However, with the recovery of processed food sales domestically and internationally, the easing of cost burdens, and efforts toward cost efficiency, we foresee better performance in the second half of the year. The current stock price mainly reflects poor performance in the first half, so recent stock price adjustments should be seen as a buying opportunity.” He added, “However, to achieve a significant stock price increase, prompt execution towards improving financial structure, such as business restructuring, is needed.”
For the second quarter of this year, CJ CheilJedang reported revenues of 7.24 trillion won, a decrease of 0.02% year-on-year, and an operating profit of 3,531 billion won, a decrease of 7.9%, which aligns with the consensus (average forecast of securities firms). Researcher Cho analyzed, “While the bio and biological resources sectors demonstrated resilience despite underlying pressures, the underperformance in domestic and international food segments caused a deterioration in overall company performance.” Food segment results showed only a 1% increase in sales due to domestic market sluggishness, with a 34% decline in operating profit. Although bio-sector faced base pressure from high-profit products last year (such as tryptophan and specialty products), performance in lysine and Selecta offset this, marking a return to operating profit growth after three quarters.
Researcher Cho emphasized that overseas food segment growth will play a crucial role in determining valuations. He mentioned that “Valuations are attractive, but with the slowdown in domestic sales growth, the mid-to-long-term valuation level will be largely determined by the growth potential of overseas food sales.”