KB Securities said on the 14th that while CJ CheilJedang's food business results for the third quarter this year are solid, the bio institutional sector is likely to be weak. It lowered its target price to 300,000 won from the previous 310,000 won, while maintaining a "buy" rating. CJ CheilJedang's closing price in the previous trading day was 233,500 won.
KB Securities estimated that CJ CheilJedang's third-quarter sales on a consolidation basis will come to 7.5866 trillion won, up 2.3% from a year earlier, and operating profit will be 368.8 billion won, down 11.4%. Operating profit is expected to fall short of market expectations.
The main reason for the weak operating profit is a slowdown in the scale and profitability of the bio business. Ryu Eun-ae, an analyst at KB Securities, expected operating profit in CJ CheilJedang's bio institutional sector in the third quarter to drop by as much as 51.5% from a year earlier.
Ryu said, "Domestic food sales will remain at the level of the same period a year earlier," but added, "The bio business will fall short of market expectations due to factors such as increased lysine supply in Europe, intensified competition for high-revenue products such as tryptophan, and a quarter-over-quarter decline in SPC sales."
However, improving the financial structure following the sale of the feed and livestock subsidiary CJ Feed&Care (Feed&Care·F&C) and the reorganization of the business around food are positives. CJ CheilJedang disclosed on the 1st that it had decided to sell the F&C business. Ryu said, "The sale proceeds will be conducted in an Earn Out method, with the amount to be determined in 2029 within 350 billion won, and the receipt of the sale proceeds will take place over the next three years."
Korea Investment & Securities viewed the sale as likely to yield effects including: ▲ improvement in the financial structure due to a decrease in borrowing fund ▲ highlighting of the food business growth rate due to the exclusion of F&C from consolidation ▲ securing funds for mergers and acquisitions (M&A).
Ryu said, "Waiting will be necessary, with proceeds received in installments and the total amount determined in 2029, but it is worth focusing on visible improvements in fundamentals."