1Q22 Preview: OP of KRW397.7bn (+3.3% YoY)
The author is an analyst of KB Securities. She can be reached at leesunhwa@kbfg.com. -- Ed.
Maintain BUY, target price of KRW470,000
We maintain BUY and TP of KRW470,000 on CJ CheilJedang. No significant revisions were made to 2022E-24E OP CAGR, so our TP is unchanged. The company maintains its strong presence in the bio market, high profit margins (supported by rising lysine spot prices) and a business model convenient for price hikes, helping offset potential increases in feedstock prices.
1Q22 preview: OP of KRW397.7bn (+3.3% YoY) in line with consensus; Excluding CJ Logistics, OP at KRW308.5bn
We forecast 1Q22 consolidated revenue at KRW6.68tn (+8.2% YoY, -3.8% QoQ) and OP at KRW397.7bn (+3.3% YoY, +68.1% QoQ; 6.0% OPM), which is in line with the market consensus of KRW385.8bn. Excluding CJ Logistics, revenue comes in at KRW4.14tn (+12.8% YoY) and OP at KRW308.5bn (-9.8% YoY; 7.4% OPM). The recent rise in feedstock prices should raise costs, but we see CJCJ continuing its earnings run as rapid top-line growth is sustained with the company’s solid market presence. Also, quarterly dividends should begin in 1Q22 (KRW1,100 DPS estimate).
Food: Top-line growth fueled by price hikes; continual upward pressure on feedstock prices
Despite continual upward pressure on feedstock prices, Food has sustained its profit margins by raising selling prices. Domestic operations are enjoying growth from the online, CVS and B2B sales channels. Global operations are seeing top-line growth momentum from Schwan’s (Oct price hike), though we expect a slight YoY drop in profit margins due to higher logistics/labor costs related to the resurgence of COVID-19. Overall, Food should see revenue grow 13.7% YoY and OP shrink 2.9% YoY.
Bio: Price hike supported by market dominance
Bio should post revenue/OP growth of 17.9% YoY/54.8% YoY as booming market conditions allow sufficient price hikes to cover continually rising feedstock costs.
Feed & Care: High base; improving conditions
Feed & Care should see revenue up 2.7% YoY and OP down 79.6% YoY; a high base should reduce revenue growth driven by improvements in livestock market conditions in Southeast Asia since 4Q21.