CJ CheilJedang Delivers Strong Bio Results…Target Price Lowered [Click e-Stock]

KB Securities Maintains ‘Buy’ Rating
“Structural Improvement in Bio Segment Confirmed”

KB Securities maintained its 'Buy' investment rating on CJ CheilJedang, which produces both food and bio-materials, on August 12, but lowered the target price by 7.1% from 280,000 won to 260,000 won.

The target price was revised downward to reflect increased non-operating expenses due to foreign exchange and derivatives trading losses in the second quarter, as well as a conservative earnings guidance for the third quarter. However, as the structural improvement in the bio business became evident, the target price-to-earnings ratio (PER) was raised from the previous 11 times to 13 times.

Although the target price was lowered, the recent share price has dropped even more sharply, and as a result, compared to the closing price on August 10 (205,500 won), there is now a 26.5% potential upside, according to the analysis.

Eunae Ryu, analyst at KB Securities, stated, "Through this recent business restructuring, we are now able to more accurately evaluate the independent value of cash-cow businesses such as K-Food and commodity bio, as well as high value-added new businesses."

For the second quarter (excluding CJ Logistics), CJ CheilJedang recorded sales of 4.195 trillion won, up 10.2% year-on-year, and operating profit of 161.9 billion won, down 18.4%. These results were in line with consensus estimates (the average forecast by securities firms).

CJ CheilJedang's AI-based marketing intelligence platform 'Food AI 360' developed in-house. CheilJedang

In Korea, processed food sales grew by 3.6% thanks to strong new product sales, but the materials division declined 2.4% due to price reductions and weaker soybean meal market conditions. Overseas, sales in the Americas increased 10.2% driven by dumplings and Hetbahn, but operating profit improvement was limited due to rising oil prices and heightened promotional expenses. Sales in non-Americas regions—including Europe, Oceania, and Vietnam—increased by 20%.

The bio division stood out the most. Sales grew by 20.8% and the operating profit margin was 6.7%, exceeding market expectations. The key drivers were increased lysine sales in North America, an 80–90% quarter-on-quarter rise in methionine prices, and favorable market conditions for specialty arginine, all contributing to improvement in animal nutrition business.

Analyst Ryu predicts that the structural improvement in the bio segment will accelerate in the second half of the year. She commented, "Demand for high-profit products such as specialty amino acids and nucleic acids remains strong. In particular, following the recovery in lysine sales volume in the second quarter, the announcement of definitive tariffs on Chinese lysine in North America in July will likely lead to higher selling prices starting from the fourth quarter."

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