[Edaily Reporter Hyera Lee ] On the 20th, LS SECURITIES projected that CJ CheilJedang Corp(097950)would see its bio business bottom out in the first quarter and begin a recovery, driving improved earnings in the second half of the year.

Park Seong-ho, an analyst at LS SECURITIES, stated, “While the domestic food business continues to experience low growth, the bio business is expected to show a gradual rebound in earnings, with the first quarter marking the low point,” adding, “We expect a ‘weak first half, strong second half’ earnings trend this year.”
LS SECURITIES projected that CJ CheilJedang Corp.’s consolidated second-quarter revenue would total 6.8902 trillion won, down 4.8% year-over-year, while operating profit would decline 22.1% to 275.1 billion won.
The domestic food business is expected to see sales growth in the low single digits. Analyst Park noted, “While the slump in ingredient foods continues, sales volume of processed foods is gradually improving,” but added, “Rising prices of raw materials, such as packaging materials and pork, along with exchange rate pressures, will weigh on profitability.”
The overseas food business is expected to continue its growth trend, particularly in new regions. He emphasized, “While key categories such as dumplings and Global Strategic Products (GSP) continue to show solid growth, the recovery of the U.S. business’s growth rate is the key factor in improving overall performance.” He added, “Although the burden of raw material prices and increased global marketing costs will persist, the cost burden is expected to ease as sales expand in the second half of the year.”
For the bio business, revenue is expected to decline year-over-year due to the high base effect from last year. However, the company anticipates a quarterly improvement trend, with the first quarter marking the low point. Analyst Park elaborated, “Competition in the large-scale amino acid market is gradually easing, and Chinese livestock demand has passed its trough, so a rebound is expected.”
He noted that the recovery in earnings, led by the bio business, will become more pronounced in the second half of the year. He cited the following as positive factors: △improved margins due to the recovery of lysine prices; △the recovery of Chinese livestock demand; and △the possibility of anti-dumping duties being imposed on U.S. lysine. He also forecast that the food business could see improved profitability, driven by an increase in the share of overseas GSP sales.
Analyst Park assessed, “The current stock price stands at a 12-month forward price-to-earnings ratio (PER) of 7x and a price-to-book ratio (PBR) of 0.4x; even considering the sluggish food industry conditions, the valuation burden is very low,” adding, “Once the earnings improvement in the bio business becomes visible, this undervaluation is likely to be resolved.”