[Click e-Stock] "CJ CheilJedang Stays Strong Despite Rising Grain Prices"

Shinhan Investment Corp. Maintains Target Price at 260,000 Won

On September 16, Shinhan Investment Corp. reaffirmed its "Buy" rating and target price of 260,000 won for CJ CheilJedang, a food and bio company. Despite prolonged weakness in the stock due to sluggish performance in the bio sector caused by increased supply from China and intensifying competition, the company analyzed that there is an upside potential of 45.5% compared to the closing price of 178,700 won on September 5.

Shinhan Investment Corp. research analyst Cho Sanghoon stated, "With the recovery in the market driven by rising oil and grain prices, this will serve as a key driving force for overall operating profit improvement."

CJ CheilJedang operates a vertically integrated structure, directly managing the entire process from procurement and processing of grains to their conversion into bio-based materials. A representative business is the fermentation of agricultural products like corn and sugar to produce amino acids for animal feed. The company is not simply consuming grains as a cost but instead is converting them into high value-added materials.

Analyst Cho explained, "The increase in grain prices can be passed on to the selling prices of amino acid products, so higher raw material costs could actually lead to improved profitability in the bio business." Normally, rising raw material costs are a negative factor for corporate profitability, but CJ CheilJedang’s bio business structure allows it to benefit from higher grain prices.

The bio business appears to have broken out of its slump starting from the first quarter of this year. In the first half, the recovery was particularly notable for high value-added specialty amino acid products, and from the second half, a broader recovery is expected for feed amino acids, including lysine and tryptophan.

In addition, favorable developments are aligning—such as the United States and Brazil imposing anti-dumping duties on Chinese-made lysine. The expected increase in selling prices following higher oil and grain prices is also likely to expand the bio segment’s profit contribution in the second half of the year.

Shinhan Investment Corp. forecasts CJ CheilJedang’s sales to reach 29.2543 trillion won and operating profit to total 1.1523 trillion won for this year. In particular, it expects operating profit from the bio segment to rise significantly next year to 341 billion won, up from 250 billion won this year.

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