CJCJ
The author is an analyst for NH Investment & Securities. He can be reached at jooyh@nhqv.com -- Ed.
We raise our TP on CJCJ to W430,000. Believing that the company has passed the bottom in terms of earnings, we see now as being a dip-buying opportunity from a turnaround perspective. A strengthening in its financials from the sale of stake in Chinese subsidiary Jixiangju is an additional positive for the firm’s EV.
Raise TP to W430,000
We raise our TP for CJCJ by 8% to W430,000. Our SOTP-calculated TP reflects value increase for major businesses.
In our view, the company has passed the bottom in terms of earnings, with the subdued consensus being met for the first time in four quarters. Considering the low earnings base of 2H22, now should be the time to buy at a low point from a turnaround perspective. In addition, as the paid-in capital increase of CJ CGV is set to be completed in September, group risks should no longer have a negative impact on CJCJ’s share price. Also positive in terms of EV, the recent sale of stake in Chinese subsidiary Jixiangju for W300bn has bolstered the firm’s financials.
2Q23 review: Beats muted expectations
CJCJ posted consolidated 2Q23 sales of W7,219.4bn (-4% y-y) and OP of W344.5bn (-32% y-y), in line with the reduced consensus. Excluding subsidiary CJ Logistics, sales climbed 4% y-y, while OP slid 40% y-y.
At the food division, 2Q23 sales totaled W2,732.2bn (+5% y-y). Demand for processed food is recovering at home, and overseas earnings remain solid, especially in the Americas. In particular, it is encouraging that Red Baron products ranked first in market share in the US pizza market for the first time ever. Meanwhile, the bio division (including FNT) performed poorly due to a drop in global amino acid sales, but as the sales portion of specialty products widened to 21%, profitability improved. The F&C division successfully turned to black after overcoming the sluggishness of 1Q23 on a rebound in feed margins.