DAISHIN SECURITIES said on the 12th it believes the likelihood that a merger or succession process between CJ and CJ Olive Young will take place in the near term is low.
It maintained its Buy investment rating and set a target price of 220,000 won, up 20.8% from the previous level, reflecting the increase in equity value based on performance estimates for CJ Olive Young. CJ's previous day's closing price was 188,400 won.
DAISHIN SECURITIES explained that the target price hike reflects the increased value of CJ's equity in CJ Olive Young, as it raised its sales outlook for Olive Young for this year and next.
DAISHIN SECURITIES projected CJ Olive Young's sales this year at 5.6 trillion won, up 17.6% from a year earlier, and next year's sales at 6.4 trillion won, up 13.5% from a year earlier. Accordingly, it estimated the value of CJ's equity stake (51.2%) in CJ Olive Young at 4.6 trillion won, a 25% increase from the previous 3.7 trillion won.
Yang Ji-hwan, a DAISHIN SECURITIES analyst, said, "As foreign visitor demand rises, we reflected expectations for top-line growth and profitability improvement due to the possibility that Olive Young's inbound sales will exceed the previous outlook and the expanding share of online sales."
Regarding the recent return of Lee Sun-ho, the eldest son of CJ Group Chairman Lee Jae-hyun, to the holding company as head of the CJ Future Strategy Office, he said, "Market expectations are high for a merger between CJ and CJ Olive Young, but we believe the possibility that the two companies' merger or succession process will take place in the near term is low."
It also predicted that Olive Young's sales will grow as the number of foreign entrants to Korea increases and K-beauty continues to expand. In Jul. 2016, the number of foreign entrants was 1,733,000, the highest level since 2016 Jul.