IBK Securities said on the 18th that it expects the dining-out and institutional meal markets to structurally shift in favor of large operators, and projected that CJ Freshway's growth will continue. It maintained a Buy rating and a target price of 48,000 won. CJ Freshway's previous trading day closing price was 26,800 won.
CJ Freshway posted consolidated third-quarter revenue of 901.2 billion won and operating profit of 33.7 billion won. Those figures rose 8.3% and 19.5%, respectively, from a year earlier. In particular, revenue hit a record high for a quarter.
By segment, the food material distribution business generated 667 billion won in revenue, and the institutional meal segment recorded 227.4 billion won.
Nam Seong-hyeon, an analyst at IBK Securities, said, "It is positive in that these figures were achieved amid continued sluggish consumer spending and a downturn in the dining-out industry."
In particular, the third-quarter results were assessed as positive not only in terms of top-line growth but also in quality. Nam first explained the reason: "Amid continued low-priced food material offensives due to an economic slowdown, the company continued to expand its market share by increasing the proportion of franchise supply."
He also cited simultaneous improvements in scale and profitability thanks to the expansion of the institutional meal division's portfolio, including hospitals, kids, and Incheon Airport concessions, and a strategy to diversify online channels.
IBK Securities projected that CJ Freshway's growth will continue. That is because most food material companies find it difficult to aggressively pursue infrastructure investments due to the burden of large-scale investment.
In particular, it pointed to three factors driving CJ Freshway's earnings growth: ▲ the possibility of expanding market share in franchises and online through the establishment of its own logistics service ▲ efficiently operating a kitchenless strategy through manufacturing capabilities ▲ building manufacturing lines that can provide business-to-business (B2B) manufacturing and solutions.
Nam said, "The dining-out and institutional meal markets are expected to structurally shift in favor of large operators," and projected that CJ Freshway's earnings will structurally improve.