"CJ CheilJedang: Rising Grain Prices Could Improve Bio Profitability...Target Price of KRW 260,000"

[Financial News] Shinhan Investment & Securities said the recent rise in grain prices could improve CJ CheilJedang’s bio-sector performance. The company has a business structure that converts grain into high-value-added materials such as protein. It therefore maintained its “Buy” rating and target price of KRW 260,000.
Jo Sang-hoon, a researcher at Shinhan Investment & Securities, said on the 16th, "CJ CheilJedang’s bio-sector performance has remained weak for an extended period due to increased supply from China and intensifying competition, weighing on its share price recently. However, we are focusing on the potential for earnings growth as the bio-sector normalizes in the second half of the year."
In particular, the firm expects higher oil and grain prices to improve profitability. CJ CheilJedang does not simply consume agricultural inputs such as corn and sugar as costs; it ferments them and converts them into feed-grade amino acids, among other products, the analysis said.
Jo observed, "As higher grain prices are passed on through the selling prices of amino acid products, rising raw-material costs could instead lead to improved bio-sector profitability. A broad-based recovery centered on feed-grade amino acids is expected from the second half of the year."
He added, "I believe the valuation remains attractive. The bio business will support the downside protection of company-wide earnings. Future growth in the global food business will determine the medium- to long-term valuation level."
[email protected] Jo Sang-hoon Reporter