CJ CheilJedang (097950 KS ) Processed food recovery is a key variable
Food & Beverage 3Q19 preview Company Report For 3Q19, we project CJ CheilJedang (CJCJ) to post an 18.3% YoY rise in revenue and a September 26, 2019 5.3% YoY fall in operating profit on a consolidated basis. For the company ’s mainstay businesses (processed food, foodstuff, bio, and feed/livestock; excluding CJ Logistics [000120 KS/Buy/TP: W200,000/CP: W148,000]), we look for revenue growth of 25.9% YoY, but see operating profit declining 17.1% YoY (to W175bn). We expect the processed food and feed/livestock units to fare poorly. (Maintain) Buy In processed food, which includes Schwan’s (acquired in 1Q19), we expect operating Target Price (12M, W) 340,000 profit to contract 8.3% YoY. Excluding Schwan ’s, we estimate a much sharper fall in operating profit (-34.8% YoY), due to: 1) higher prices of raw materials (rice, etc.); 2) the recognition of Chuseok gift set returns (due to the holiday occurring earlier this year); 3) Share Price (09/25/19, W) 236,000 increased marketing spending in home meal replacements (HMRs) and other competitive segments; 4) initial costs related to the operation of the Jincheon plant ; 5) Expected Return 44% purchase price allocation (PPA) related to Schwan ’s; and 6) costs associated with SKU rationalization.
OP (19F, Wbn) 795 In bio, we look for operating profit growth of 4.8% YoY. Despite lower prices of lysine Consensus OP (19F, Wbn) 854 and methionine and high base effects for Selecta, we expect operating profit to improve YoY thanks to higher prices and volume growth of tryptophan/nucleotides and valine. EPS Growth (19F, %) -72.3 Market EPS Growth (19F, %) -28.1 We expect the feed/livestock unit to turn to a loss YoY, as poultry pricing in Indonesia and hog pricing in Vietnam have been recovering more slowly than expected following P/E (19F, x) 15.7 the outbreak of African swine fever. Market P/E (19F, x) 13.3 KOSPI 2,073.39 Processed food unit in need of fundamental improvements; Investments in high value-added bio business Market Cap (Wbn) 3,553 Shares Outstanding (mn) 16 Improving the profitability of the processed food unit remains a challenge for CJCJ. The Free Float (%) 51.9 unit has performed poorly since 2H18, hurt by: 1) investments in the Jincheon plant; 2) Foreign Ownership (%) 22.0 the effects of SKU expansion; and 3) increased SG&A expenses due to investments and marketing expenses in the HMR segment. Currently, CJCJ is overhauling the processed Beta (12M) 0.38 food business by reducing less-profitable SKUs. CJCJ re duced SKUs by approximately 52-Week Low 221,500 300 in 1H19 and plans an additional reduction of 700 SKUs in 2H19, bringing the SKU 52-Week High 361,500 count down from 4,200 in 2018 to 3,200 at end-2019.
(%) 1M 6M 12M Meanwhile, CJCJ is investing in nucleotides and tryptophan, which are high value-added Absolute 2.8 -26.5 -28.7 bio products. The company expanded tryptophan capacity by 8,000 tonnes (from 23,000 Relative -3.4 -23.9 -19.6 to 31,000 tonnes) in June, as 100% capacity had been reached. We expect the volume growth to generate operating leverage effects. CJCJ also plans to expand nucleotide 120 CJ CheilJedang KOSPI capacity by 10,000 tonnes (from 35,000 to 45,000 tonnes) by end-2019 to meet growing 110 demand from China’s downstream industries (instant noodles, fermented paste , etc.). 100 Higher prices and volume growth should support nucleotide earnings expansion. 90 80 Maintain Buy and TP of W340,000 70 60 With CJCJ working on improving its fundamentals, we believe profitability is likely to 9.18 1.19 5.19 9.19 improve in earnest from 2020. That said, the short-term earnings outlook is weak. Thus, we advise accumulating the stock at current share price leve ls, given the earnings Mirae Asset Daewoo Co., Ltd. upside in 2020 and CJCJ’s long-term growth potential.
[ F&B ] FY (Dec.) 12/16 12/17 12/18 12/19F 12/20F 12/21F Revenue (Wbn) 14,563 16,477 18,670 22,251 24,529 26,688 Woon -mok Baek +822 -3774 -1679 OP (Wbn) 844 777 833 795 927 1,015 [email protected] OP Margin (%) 5.8 4.7 4.5 3.6 3.8 3.8
NP (Wbn) 276 370 875 246 351 390 EPS (W) 19,044 25,536 54,173 15,029 21,400 23,822 ROE (%) 8.4 10.9 21.5 5.0 6.7 7.1
P/E (x) 18.8 14.3 6.1 15.7 11.0 9.9 P/B (x) 1.5 1.5 1.1 0.8 0.7 0.7 Dividend Yield (%) 0.7 0.8 1.1 1.5 1.5 1.5 Note: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: Company data, Mirae Asset Daewoo Research estimates
September 26, 2019 CJ CheilJedang
Table 1. 3Q19 preview (Wbn, %) 3Q19F Growth 3Q18 2Q19 Mirae Asset Consensus Daewoo Revenue 4,946 5,515 5,851 5,984 18.3 6.1 Operating profit 265 175 251 285 -5.3 43.2 Pretax profit 162 44 161 179 -0.8 263.2 Net profit 108 16 98 109 -8.9 507.1 OP margin 5.4 3.2 4.3 4.8 - - Net margin 2.2 0.3 1.7 1.8 - - Note: Schwan’s earnings (processed food business) reflected from 1Q19 (March) Source: Company data, Quantiwise, Mirae Asset Daewoo Research estimates
Table 2. Quarterly and annual earnings (Wbn, %) 18 19F 18 19F 20F
1Q 2Q 3Q 4Q 1Q 2Q 3QF 4QF Annual Annual Annual Revenue 4,349 4,454 4,946 4,922 5,018 5,515 5,851 5,867 18,670 22,251 24,529 Operating profit 210 185 265 173 179 175 251 190 833 795 927 Pretax profit 112 1,048 162 -28 76 44 161 142 1,294 424 563 Net profit 63 758 108 -54 41 16 98 91 875 246 351 OP margin 4.8 4.1 5.4 3.5 3.6 3.2 4.3 3.2 4.5 3.6 3.8 Net margin 1.4 17.0 2.2 -1.1 0.8 0.3 1.7 1.5 4.7 1.1 1.4 Revenue growth 12.5 13.9 12.1 14.7 15.4 23.8 18.3 19.2 13.3 19.2 10.2 OP growth 9.2 12.3 -1.5 14.8 -14.8 -5.0 -5.3 9.9 7.2 -4.5 16.6 Pretax profit growth -10.4 - -55.4 TTR -31.8 -95.8 -0.8 TTB 121.5 -67.2 32.9 Net profit growth -23.8 - -57.9 TTR -34.6 -97.9 -8.9 TTB 136.4 -71.9 42.4 Notes: Gains from the sale of CJ Healthcare reflected in 2Q18; healthcare-related revenue excluded from 2Q18; Schwan ’s earnings reflected from 1Q19 (March) Source: Company data, Mirae Asset Daewoo Research estimates
Table 3. 2019-20 earnings forecast revisions (Wbn, %) Previous Revised % chg. Notes 19F 20F 19F 19F 19F 20F - Reflected processed food SKU reduction s and Revenue 22,488 24,846 22,251 24,529 -1.1 -1.3 feed/livestock earnings weakness Operating profit 860 957 795 927 -7.5 -3.1
Pretax profit 437 543 424 563 -3.0 3.8 Net profit 256 341 246 351 -3.8 2.8 OP margin 3.8 3.9 3.6 3.8 - - Net margin 1.1 1.4 1.1 1.4 - - Source: Company data, Mirae Asset Daewoo Research estimates
Figure 1. Share performances of major processed food companies following SKU reductions in 2012-13
(1/12=100) (1/12=100) 1000 Dongwon F&B Lotte Foods 200 Shares rose in 2014-16 following Daesang Ottogi SKU reductions in 2012-13 Pulmuone CJCJ (R) 800 150
600 100 400
50 200
0 0 1/12 1/13 1/14 1/15 1/16 1/17 1/18 1/19
Source: Quantiwise, Mirae Asset Daewoo Research estimates
Mirae Asset Daewoo Research 2 September 26, 2019 CJ CheilJedang
Processed food unit in need of fundamental improvements
Back in 2013, CJCJ reduced its less profitable processed food SKUs (e.g., curry, B2B soy sauce, retort pouches), cutting nearly 1,000 SKUs (almost 25% of the total). This led to a 3.8% dip in its annual processed food revenue in 2013. After the SKU reduction, however, gross margin expanded to 40.7% YoY in 1Q14 (vs. 32.5% in 1Q13) and 39.4% in 2Q14 (vs. 34.7% in 2Q13). OP margin also climbed to 12.5% in 1Q14 (vs. 5.4% in 1Q13) and 9.3% in 2Q14 (6.6% in 2Q13).
Notably, rivals Daesang (001680 KS/Buy/TP: W33,000/CP: W22,300) and Ottogi (007310 KS/Buy/TP: W960,000/CP: W582,000) had cut their SKUs ahead of CJCJ back in 2011-12. In concert, these rationalization efforts led to eased competition among processed food companies in 2014-16, driving up margins across the segment.
However, processed food companies began to expand their HMR businesses and processed food SKUs again in 2017, driving up competitive pressure. For CJCJ, higher SG&A stemming from SKU expansion has been a drag on earnings.
Against this backdrop, CJCJ has been overhauling its processed food business in 2019; the firm reduced SKUs by approximately 300 in 1H19 and is planning an additional reduction by 700 in 2H19, bringing the total down from 4,200 in 2018 to 3,200 at end-2019. Items discontinued include canned seafood (e.g., whelk, salmon) and allulose.
Based on the 2013 case, we expect the initial costs associated with SKU rationalization to weigh on 2H19 profitability; however, margins should begin improving within a year of the SKU rationalization efforts.
In addition, marketing campaigns for new products will likely be focused on boosting profits rather than revenue. The effects of processed food price hikes should begin to be felt in 2H19. (Prices for W700bn worth of products, including Hetbahn, red chili/bean paste, and Dashida, were raised by 5-10% in February, and further increases were implemented in April-May,)
For phase 1 production at its new Jincheon food production complex, CJCJ started up 14 lines in October 2018 (six for Hetbahn, six for prepared meat, and two for frozen prepared food) and three in February 2019 (for frozen rice). We expect phase 2, which was initially slated to kick off in 2H19, to be pushed back to 2020 (11 new lines, including seven soup/stew lines, three kimchi lines, and one pizza line). We expect the food production complex to focus on improving efficiency for some time, until solid cost management is achieved (e.g., process improvement, supplier diversification, logistics/utility cost reductions).
Figure 2. CJCJ’s processed food revenue and growth Figure 3. CJCJ’s processed food OP and growth
(Wbn) (%) (Wbn) Processed food OP (L) (%) 1200 Processed food revenue (L) 30 150 Processed food OP margin (R) 15 Processed food revenue growth (R) Following SKU reductions in 2013, 120 margins began to 12 900 After falling in 2013 due to 20 improve in 2014 SKU reductions, revenue started to rebound in 2014 90 9 600 10 60 6
300 0 30 3
0 -10 0 0 11 12 13 14 15 16 17 18 19F 20F 11 12 13 14 15 16 17 18 19F 20F
Note: Schwan’s earnings excluded from processed food revenue Note: Schwan’s earnings excluded from processed food OP Source: Company data, Mirae Asset Daewoo Research estimates Source: Company data, Mirae Asset Daewoo Research estimates
Mirae Asset Daewoo Research 3 September 26, 2019 CJ CheilJedang
HMR: Revenue vs. profits
Domestically, food companies have been focusing their investments in the HMR space, where consumption is growing. For traditional products, companies are spending mainly on maintenance due to stagnant consumption.
HMRs have strong growth potential but are unlikely to be profitable anytime soon. Many F&B companies that have been investing in HMRs saw their OP margins contract YoY in 2Q19, as they spent aggressively on ads/marketing in an effort to gain a lead in the market.
Because the HMR market is in the early growth phase, we believe it is important to gain an early lead by raising brand awareness through investments and promotions. In the F&B industry, forming an oligopoly is often critical to generating profits. The HMR market is not yet an oligopoly, but we believe it will become one over time, with only the top three or four companies likely to make profits.
CJCJ is the leading player in the HMR segment. Revenue from HMR products—Cupbahn, the Gourmet lineup (Hamburg steak, frozen pizza, chicken, corn dogs), and soups/stews— totaled W33bn in 2015. With the addition of 40 new products (Bibigo dumplings, frozen noodles, porridges, etc.), HMR revenue expanded 46% YoY to W350bn in 2018. CJCJ has continued to expand its exposure to the segment in 2019, introducing trendy HMRs, Cookit meal kits, fresh HMRs, and care food items (specially formulated foods for consumers with special dietary needs). Given the qualitative evolution of the HMR category, we estimate HMR revenue will increase 35% YoY in 2019 and 28% YoY in 2020.
Along with Hetbahn and Bibigo, we expect CJCJ to foster Cookit as a major HMR brand. Cookit meal kits consist of a set of partially prepared ingredients; 15 such products were introduced in April, and CJCJ is set to expand the number of offerings to 200 by 2020 (revenue targets: W10bn in 2019 and W100bn within three years).
For its HMR business, CJCJ is focusing on growing revenue (rather than near-term profits) through the development of new products suited to changing consumer tastes. Because the HMR market is in the early stages of growth, and many large F&B corporations are entering the business, we think it is important to grab control of the market early on. Thus, we expect CJCJ to remain focused on marketing and new product development. At the current revenue level, CJCJ could make profits were it to reduce promotions and advertising spending, but it is instead likely to pursue a revenue-driven strategy in 2019 and 2020.
Figure 4. CJCJ’s quarterly HMR revenue Figure 5. CJCJ’s annual HMR revenue
(Wbn) (Wbn) 120 700
100 600
500 80 400 60 300 40 200
20 100
0 0 1Q16 1Q17 1Q18 1Q19 15 16 17 18 19F 20F
Source: Company data, Mirae Asset Daewoo Research estimates Source: Company data, Mirae Asset Daewoo Research estimates
Mirae Asset Daewoo Research 4 September 26, 2019 CJ CheilJedang
Investments vs. borrowings
In 2014-16, CJCJ was able to comfortably make investments without straining its financials. However, since 2017, the company’s has seen its spending grow markedly, due to: 1) investments in the Jincheon plant (W900bn), processed food/HMRs and bio products (methionine and tryptophan); 2) the acquisitions of Selecta (W360bn; a Brazil-based fermented soybean meal maker) and Schwan’s (US$856mn investment + US$500mn in financing); and 3) overseas investments (in China, Russia, Vietnam, etc.). As such, CJCJ’s debt- to-equity ratio climbed from 170% in 2014 to 185% in 2Q19, while net borrowings increased from W5.3tr in 2014 to W9.3tr in 2Q19.
With market concerns mounting, CJCJ is moving to cut back on its borrowings. The company has postponed phase 2 of the Jincheon plant to 2020, and plans to reduce overall investments (capex and M&As) at home and abroad in 2020 and beyond.
A significant reduction in borrowings will be possible only with the sale of assets or business units. Of note, the company could sell/develop its Gayang-dong site (book value of W500bn) and/or sell the feed/livestock unit (although the outbreak of African swine fever will likely delay such a move).
Figure 6. CJCJ’s capex trend Figure 7. CJCJ’s interest expenses and net debt
(Wbn) (Wbn) (Wbn) 1500 350 Interest expenses (L) 10000 Net debt (R) 300 1200 8000 250
900 6000 200
150 600 4000
100 300 2000 50
0 0 0 08 10 12 14 16 18 20F 22F 08 10 12 14 16 18 20F 22F
Source: Company data, Mirae Asset Daewoo Research Source: Company data, Mirae Asset Daewoo Research
Figure 8. CJCJ’s bio revenue and OP Figure 9. CJCJ’s bio market share trends
(Wbn) (Wbn) (%) 1000 Bio revenue (L) 100 75 Nucleotides Bio OP (R) Tryptophan 800 80 Valine 65 600 60
400 40 55
200 20 45 0 0
-200 -20 35 11 12 13 14 15 16 17 18 19F 20F 16 17 18 19F
Note: Selecta’s earnings reflected from 3Q17 Source: Company data, Mirae Asset Daewoo Research estimates Source: Company data, Mirae Asset Daewoo Research estimates
Mirae Asset Daewoo Research 5 September 26, 2019 CJ CheilJedang
Figure 11. Hog prices in Vietnam and chicken prices in Figure 10. CJCJ’s feed/livestock OP Indonesia
(Wbn) Feed/livestock OP (L) (%) (VND'000/kg) (IDR'000/kg) 25 Feed/livestock OP margin (R) 10 50 Vietnam hog prices (L) 25 Indonesia chicken prices (R) 20 8
40 15 6 20 10 4 30 5 2 15 0 0 20 -5 -2
-10 -4 10 10 11 12 13 14 15 16 17 18 19F 20F 4Q16 2Q17 4Q17 2Q18 4Q18 2Q19
Source: Company data, Mirae Asset Daewoo Research estimates Source: Company data, Mirae Asset Daewoo Research estimates
Figure 12. CJCJ’s p rocessed food revenue growth in major Figure 13. CJCJ’s food materials OP overseas markets
(%) (Wbn) Food materials OP (L) (%) 50 Food materials OP margin (R) 15 50 18 19F
40 12 40 30 9
30 20 6
10 3 20 0 0 10 -10 -3
0 -20 -6 US China Vietnam Overseas total 11 12 13 14 15 16 17 18 19F 20F
Source: Company data, Mirae Asset Daewoo Research estimates Source: Company data, Mirae Asset Daewoo Research estimates
Mirae Asset Daewoo Research 6 September 26, 2019 CJ CheilJedang
CJ CheilJedang (097950 KS/Buy/TP: W340,000)
Comprehensive Income Statement (Summarized) Statement of Financial Condition (Summarized) (Wbn) 12/18 12/19F 12/20F 12/21F (Wbn) 12/18 12/19F 12/20F 12/21F Revenue 18,670 22,251 24,529 26,688 Current Assets 5,522 5,868 6,429 7,013 Cost of Sales 15,126 18,171 20,025 21,827 Cash and Cash Equivalents 548 670 643 696 Gross Profit 3,544 4,080 4,504 4,861 AR & Other Receivables 2,740 2,647 2,909 3,187 SG&A Expenses 2,711 3,284 3,577 3,846 Inventories 1,498 1,722 1,998 2,174 Operating Profit (Adj) 833 795 927 1,015 Other Current Assets 736 829 879 956 Operating Profit 833 795 927 1,015 Non-Current Assets 13,975 18,462 18,486 18,457 Non-Operating Profit 461 -371 -364 -402 Investments in Associates 205 225 248 270 Net Financial Income -226 -256 -243 -239 Property, Plant and Equipment 9,742 11,101 11,174 11,149 Net Gain from Inv in Associates -5 11 11 10 Intangible Assets 3,070 4,978 4,877 4,819 Pretax Profit 1,294 424 563 613 Total Assets 19,497 24,330 24,916 25,470 Income Tax 369 128 156 169 Current Liabilities 6,680 8,768 8,954 8,962 Profit from Continuing Operations 925 296 408 443 AP & Other Payables 1,971 2,613 2,846 3,064 Profit from Discontinued Operations 0 0 0 0 Short-Term Financial Liabilities 3,842 5,287 5,198 5,059 Net Profit 925 296 408 443 Other Current Liabilities 867 868 910 839 Controlling Interests 875 246 351 390 Non-Current Liabilities 5,508 6,571 6,618 6,777 Non-Controlling Interests 50 49 57 53 Long-Term Financial Liabilities 4,196 4,917 4,817 4,817 Total Comprehensive Profit 889 473 408 443 Other Non-Current Liabilities 1,312 1,654 1,801 1,960 Controlling Interests 827 317 570 619 Total Liabilities 12,189 15,339 15,572 15,738 Non-Controlling Interests 62 156 -162 -176 Controlling Interests 4,783 5,049 5,343 5,678 EBITDA 1,473 1,824 2,085 2,168 Capital Stock 82 82 82 82 FCF (Free Cash Flow) -1,204 1,232 551 619 Capital Surplus 1,412 1,412 1,412 1,412 EBITDA Margin (%) 7.9 8.2 8.5 8.1 Retained Earnings 3,694 3,884 4,179 4,514 Operating Profit Margin (%) 4.5 3.6 3.8 3.8 Non-Controlling Interests 2,525 3,943 4,000 4,054 Net Profit Margin (%) 4.7 1.1 1.4 1.5 Stockholders' Equity 7,308 8,992 9,343 9,732
Cash Flows (Summarized) Forecasts/Valuations (Summarized) (Wbn) 12/18 12/19F 12/20F 12/21F 12/18 12/19F 12/20F 12/21F Cash Flows from Op Activities 471 2,676 1,651 1,619 P/E (x) 6.1 15.7 11.0 9.9 Net Profit 925 296 408 443 P/CF (x) 3.8 2.0 2.0 1.9 Non-Cash Income and Expense 483 1,629 1,543 1,549 P/B (x) 1.1 0.8 0.7 0.7 Depreciation 523 884 1,027 1,025 EV/EBITDA (x) 10.2 9.3 8.1 7.7 Amortization 117 145 131 128 EPS (W) 54,173 15,029 21,400 23,822 Others -157 600 385 396 CFPS (W) 87,161 117,492 119,077 121,634 Chg in Working Capital -754 1,151 -145 -204 BPS (W) 298,085 314,307 332,279 352,754 Chg in AR & Other Receivables -20 212 -243 -267 DPS (W) 3,500 3,500 3,500 3,500 Chg in Inventories -374 166 -276 -176 Payout ratio (%) 5.6 17.4 12.6 11.6 Chg in AP & Other Payables -166 117 144 124 Dividend Yield (%) 1.1 1.5 1.5 1.5 Income Tax Paid -183 -400 -156 -169 Revenue Growth (%) 13.3 19.2 10.2 8.8 Cash Flows from Inv Activities -1,035 -3,041 -1,149 -1,098 EBITDA Growth (%) 9.7 23.8 14.3 4.0 Chg in PP&E -1,648 -1,419 -1,100 -1,000 Operating Profit Growth (%) 7.2 -4.6 16.6 9.5 Chg in Intangible Assets -97 -68 -30 -70 EPS Growth (%) 112.1 -72.3 42.4 11.3 Chg in Financial Assets 34 -91 -50 -54 Accounts Receivable Turnover (x) 7.8 8.9 9.6 9.5 Others 676 -1,463 31 26 Inventory Turnover (x) 13.3 13.8 13.2 12.8 Cash Flows from Fin Activities 521 302 -508 -453 Accounts Payable Turnover (x) 11.4 12.2 11.8 11.9 Chg in Financial Liabilities 834 2,166 -189 -139 ROA (%) 5.1 1.3 1.7 1.8 Chg in Equity 588 0 0 0 ROE (%) 21.5 5.0 6.7 7.1 Dividends Paid -43 -68 -56 -56 ROIC (%) 4.3 4.4 3.9 4.2 Others -858 -1,796 -263 -258 Liability to Equity Ratio (%) 166.8 170.6 166.7 161.7 Increase (Decrease) in Cash -43 123 -27 53 Current Ratio (%) 82.7 66.9 71.8 78.3 Beginning Balance 591 548 670 643 Net Debt to Equity Ratio (%) 99.8 103.5 97.6 91.5 Ending Balance 548 670 643 696 Interest Coverage Ratio (x) 3.4 2.9 3.5 3.9 Source: Company data, Mirae Asset Daewoo Research estimates
Mirae Asset Daewoo Research 7 September 26, 2019 CJ CheilJedang
APPENDIX 1
Important Disclosures & Disclaimers 2-Year Rating and Target Price History
Company (Code) Date Rating Target Price (W) CJ CheilJedang CJ CheilJedang (097950) 08/29/2019 Buy 340,000 600,000 08/08/2019 Buy 370,000 500,000 05/13/2019 Buy 400,000 400,000 02/08/2019 After 1yr 02/08/2018 Buy 460,000 300,000 01/10/2018 Buy 480,000 200,000 10/13/2017 Buy 450,000 100,000
08/04/2017 Buy 430,000 0 Sep 17 Sep 18 Sep 19
Stock Ratings Industry Ratings Buy : Relative performance of 20% or greater Overweight : Fundamentals are favorable or improving Trading Buy : Relative performance of 10% or greater, but with volatility Neutral : Fundamentals are steady without any material changes Hold : Relative performance of -10% and 10% Underweight : Fundamentals are unfavorable or worsening Sell : Relative performance of -10% Ratings and Target Price History (Share price (─), Target price (▬), Not covered ( ■), Buy (▲), Trading Buy (■), Hold (●), Sell ( ◆)) * Our investment rating is a guide to the relative return of the stock versus the market over the next 12 months. * Although it is not part of the official ratings at Mirae Asset Daewoo Co., Ltd., we may call a trading opportunity in case there is a technical or short-term material development. * The target price was determined by the research analyst through valuation methods discussed in this report, in part based on the analyst’s estimate of future earnings. * The achievement of the target price may be impeded by risks related to the subject securities and companies, as well as general market and economic conditions.
Equity Ratings Distribution & Investment Banking Services Buy Trading Buy Hold Sell Equity Ratings Distribution 83.14% 8.72% 8.14% 0.00% Investment Banking Services 77.78% 11.11% 11.11% 0.00% * Based on recommendations in the last 12-months (as of June 30, 2019)
Disclosures As of the publication date, Mirae Asset Daewoo Co., Ltd. has acted as a liquidity provider for equity-linked warrants backed by shares of CJ CheilJedang as an underlying asset; other than this, Mirae Asset Daewoo has no other special interests in the covered companies.
Analyst Certification The research analysts who prepared this report (the “Analysts”) are registered with the Korea Financial Investment Association and are subject to Korean securities regulations. They are neither registered as research analysts in any other jurisdiction nor subject to the laws or regulations thereof. Each Analyst responsible for the preparation of this report certifies that (i) all views expressed in this report accurately reflect the personal views of the Analyst about any and all of the issuers and securities named in this report and (ii) no part of the compensation of the Analyst was, is, or will be directly or indirectly related to the specific recommendations or views contained in this report. Mirae Asset Daewoo Co., Ltd. (“Mirae Asset Daewoo”) policy prohibits its Analysts and members of their households from owning securities of any company in the Analyst’s area of coverage, and the Analysts do not serve as an officer, director or advisory board member of the subject companies. Except as otherwise specified herein, the Analysts have not received any compensation or any other benefits from the subject companies in the past 12 months and have not been promised the same in connection with this report. Like all employees of Mirae Asset Daewoo, the Analysts receive compensation that is determined by overall firm profitability, which includes revenues from, among other business units, the institutional equities, investment banking, proprietary trading and private client division. At the time of publication of this report, the Analysts do not know or have reason to know of any actual, material conflict of interest of the Analyst or Mirae Asset Daewoo except as otherwise stated herein.
Mirae Asset Daewoo Research 8 September 26, 2019 CJ CheilJedang
Disclaimers This report was prepared by Mirae Asset Daewoo, a broker-dealer registered in the Republic of Korea and a member of the Korea Exchange. Information and opinions contained herein have been compiled in good faith and from sources believed to be reliable, but such information has not been independently verified and Mirae Asset Daewoo makes no guarantee, representation or warranty, express or implied, as to the fairness, accuracy, completeness or correctness of the information and opinions contained herein or of any translation into English from the Korean language. In case of an English translation of a report prepared in the Korean language, the original Korean language report may have been made available to investors in advance of this report. The intended recipients of this report are sophisticated institutional investors who have substantial knowledge of the local business environment, its common practices, laws and accounting principles and no person whose receipt or use of this report would violate any laws or regulations or subject Mirae Asset Daewoo or any of its affiliates to registration or licensing requirements in any jurisdiction shall receive or make any use hereof. This report is for general information purposes only and it is not and shall not be construed as an offer or a solicitation of an offer to effect transactions in any securities or other financial instruments. The report does not constitute investment advice to any person and such person shall not be treated as a client of Mirae Asset Daewoo by virtue of receiving this report. This report does not take into account the particular investment objectives, financial situations, or needs of individual clients. The report is not to be relied upon in substitution for the exercise of independent judgment. Information and opinions contained herein are as of the date hereof and are subject to change without notice. The price and value of the investments referred to in this report and the income from them may depreciate or appreciate, and investors may incur losses on investments. Past performance is not a guide to future performance. Future returns are not guaranteed, and a loss of original capital may occur. Mirae Asset Daewoo, its affiliates and their directors, officers, employees and agents do not accept any liability for any loss arising out of the use hereof. Mirae Asset Daewoo may have issued other reports that are inconsistent with, and reach different conclusions from, the opinions presented in this report. The reports may reflect different assumptions, views and analytical methods of the analysts who prepared them. Mirae Asset Daewoo may make investment decisions that are inconsistent with the opinions and views expressed in this research report. Mirae Asset Daewoo, its affiliates and their directors, officers, employees and agents may have long or short positions in any of the subject securities at any time and may make a purchase or sale, or offer to make a purchase or sale, of any such securities or other financial instruments from time to time in the open market or otherwise, in each case either as principals or agents. Mirae Asset Daewoo and its affiliates may have had, or may be expecting to enter into, business relationships with the subject companies to provide investment banking, market-making or other financial services as are permitted under applicable laws and regulations. No part of this document may be copied or reproduced in any manner or form or redistributed or published, in whole or in part, without the prior written consent of Mirae Asset Daewoo.
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Mirae Asset Daewoo Research 9 September 26, 2019 CJ CheilJedang
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Mirae Asset Daewoo Research 10