[Alpha Biz= Kim Jisun] CJ CheilJedang, the flagship company of CJ Group, has seen its stock price tumble more than 40% from last year’s peak of KRW 407,500, despite the KOSPI hitting record highs. Analysts point to lackluster earnings and underperformance in its bio business — once seen as a new growth driver — as key factors weighing on the stock.



Once trading above KRW 400,000, shares have now dropped to the low KRW 200,000 range, leaving the company largely excluded from the broader market rally.



The main drag has been weak earnings. In the second quarter of this year, CJ CheilJedang’s food business, which accounts for 40% of total sales, underperformed. Sales fell 1% year-on-year to KRW 2.69 trillion, while operating profit plunged 34% to KRW 90.1 billion. Overall operating profit for the first half of 2024 slumped 47.9% to KRW 95.8 billion.



Domestic market weakness has been a significant factor. With high interest rates and inflation dampening consumption, domestic food sales fell 5% year-on-year to KRW 1.32 trillion in Q2, marking the fifth consecutive quarter of decline.



Prospects remain dim as the domestic downturn is expected to persist. Although government consumption coupon programs may provide a temporary boost, their impact on CJ CheilJedang will be limited since major retailers and e-commerce channels — where the company mainly sells products — are excluded.



The slowdown in the bio business is also weighing on sentiment. While the segment posted sales of KRW 1.08 trillion and operating profit of KRW 102.4 billion in Q2, growing 2% and 8% year-on-year respectively, analysts forecast weaker results ahead. Daishin Securities cited continued price declines in high-margin products, while Kiwoom Securities pointed to deteriorating market conditions for lysine in Europe and other core products.



Still, some bright spots remain. Overseas food sales rose 3% to KRW 1.37 trillion, supported by growing recognition of the “Bibigo” brand and expanded distribution in major markets including the U.S., Europe, Oceania, and Japan. Improving consumer sentiment in key export destinations such as the U.S. is also seen as a positive driver.



Some market watchers argue CJ CheilJedang is undervalued compared to peers, with cautious views emerging that current levels may represent a buying opportunity.

 

 

 

 

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