"CJ CheilJedang: A disappointing year, but set to benefit from base effects and a stronger won next year"

[Financial News] Hana Securities maintained its Buy rating and 370,000-won target price for CJ CheilJedang on the 3rd, expecting its earnings to improve next year.
Shim Eun-joo, an analyst at Hana Securities, said, "CJ CheilJedang will inevitably see profits decline year on year in the third and fourth quarters as well," adding, "This year, consolidated operating profit excluding logistics is expected to fall 17.9% from a year earlier to 675.6 billion won."
However, it forecast next year's consolidated revenue excluding logistics at 16.6588 trillion won and operating profit at 808.3 billion won. The figures represent increases of 1.8% and 19.6%, respectively, from the previous year, and the analyst expected a base effect.
Regarding the restructuring of its business portfolio, she said, "It appears the company has decided to sell its starch and sweetener business division and is also pursuing the sale of three feed subsidiaries in China." She interpreted this as "a commitment to improve the efficiency of its core business and financial structure through a strategy of selection and concentration."
The establishment of a joint venture between CJ CheilJedang and ADM is expected to strengthen their competitiveness in global amino acid production. Shim said, "CJ CheilJedang can secure cost competitiveness by sourcing raw materials reliably from ADM, while ADM can enhance its product competitiveness through CJ CheilJedang's production technology." She added, "This cooperation will create positive synergies in addressing unfairness surrounding Chinese-made lysine in the Americas."
The analyst also expected CJ CheilJedang to benefit from continued won strength. Shim said, "With share buybacks and dividend payments by large-cap semiconductor stocks coinciding recently, forecasts have emerged that the decline in the won-dollar exchange rate could last longer than expected." She estimated, "CJ CheilJedang is expected to benefit at the net income level because it has relatively high foreign-currency debt. A 100-won drop in the won-dollar exchange rate would improve consolidated net income by 14.1% compared with previous estimates."

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