Samsung Securities said CJ(001040)'s results missed market expectations due to weak profitability at Olive Young. It maintained a "buy (BUY)" rating while lowering its target price to 180,000 won from 260,000 won. The previous trading day's CJ closing price was 122,800 won.
CJ said it posted consolidated revenue of 11.5281 trillion won and operating profit of 531.8 billion won in the second quarter. Revenue rose 4% from a year earlier, but operating profit fell 14%. In particular, operating profit missed market expectations by 20%.
Park Se-ung of Samsung Securities said, "Results missed market expectations due to weak profitability at affiliates in the food and bio institutional sector and at Olive Young."
Olive Young's second-quarter revenue was 1.8 trillion won, up 23% from a year earlier, but net profit was 135.2 billion won, down 6%. The burden of expenses increased due to investment in new businesses and changes in product mix.
Park said, "Expenses related to new businesses, such as the 'Olive Better' business and entry into the North American market, have increased, and the decline in profitability due to changes in the sales product mix has become full-fledged starting this year," adding, "In the second quarter, a one-off increase in corporate taxes was also reflected in the results."
Park projected that Olive Young's year-over-year profitability weakness will continue in the second half of this year. However, the company assessed that sales growth remains solid.
Olive Young's second-quarter online sales were 548.3 billion won, up 25% from a year earlier, and offline sales also rose 22% to 1.25 trillion won. With global demand continuing, the analysis is that while the high growth of online sales persists, sales per offline store are also increasing.