[E-Daily Reporter Kwon Oh Seok ] Shinhan Investment Securities announced on the 15th that it is maintaining its “Buy” rating and 260,000 won target price for CJ CheilJedang Corp(097950).

Cho Sang-hoon, an analyst at Shinhan Investment Securities, said, “The valuation is attractive at a 12-month forward P/E ratio of 9. The biotech business is providing a floor for the company’s overall earnings, and future global food sector growth will determine the medium- to long-term valuation level.”
He explained, “The stock price has been weak as the slump in bio business performance has persisted due to increased supply from China and intensifying competition. However, as market conditions recover due to rising oil and grain prices, this will serve as a key driver for improving company-wide operating profit.” He added, “We are focusing on the expansion of profit leverage resulting from the normalization of the bio business environment in the second half of the year. Additionally, swift execution is required to improve the financial structure, such as through business restructuring.”
Third-quarter revenue and operating profit are expected to come in at 7.3194 trillion won (-1.6% year-over-year) and 308.8 billion won (-10.9%), respectively, falling 6% short of the consensus estimate. Excluding CJ LOGISTICS, revenue and operating profit are estimated at 4.2072 trillion won (-8%) and 193.5 billion won (+1.9%), respectively. While the biotech sector is expected to emerge from its slump, the food sector is projected to perform even worse than anticipated due to cost pressures.
Analyst Cho added, “We expect the recovery to be driven primarily by specialty products in the first half of the year, shifting to a broader recovery centered on feed-grade amino acids (such as lysine and tryptophan) starting in the second half.” He continued, “We anticipate an expansion in the bio segment’s contribution to profits, driven by favorable factors such as rising selling prices due to higher grain costs and the imposition of anti-dumping duties on Chinese lysine by the U.S. and Brazil.”