iM Securities has reiterated a "buy" rating on CJ (KRX: 001040) with a target price of ₩215,000, implying upside of 43.3% from the current price of ₩150,000.
The brokerage argues that three interlocking regulatory changes — mandatory cancellation of treasury shares, restrictions on dual listings, and a new framework for setting fair merger valuations — will disproportionately benefit CJ, the holding company of one of South Korea's largest conglomerates.
Treasury shares face the clock
South Korea's third revision to the Commercial Act was promulgated and came into force on 6th March. Under its provisions, both CJ's treasury-share holding of 7.3% and CJ Olive Young's holding of 22.6% must be substantially cancelled within eighteen months of that date.
CJ Olive Young's 22.6% treasury-share position arose in April last year, when the company exercised a call option over a stake held by Korea Beauty Pioneer. The current shareholder structure of CJ Olive Young is: CJ, 51.2%; treasury shares, 22.6%; Lee Sun-ho, 11.0%; Lee Jae-hwan, 4.6%; and Lee Kyung-hoo, 4.2%.
Dual-listing curbs lift the odds of a merger
New rules on dual listings — where an already-listed parent floats a subsidiary separately on the same exchange — require any unlisted subsidiary seeking its own stock-market debut to satisfy three criteria: operational independence, managerial independence, and adequate investor protection. Failure on any single criterion is grounds for rejection.
The practical consequence, iM Securities argues, is that an independent listing for CJ Olive Young has become considerably less likely, while the probability of a merger with the parent company, CJ, has risen correspondingly.
A fairer merger yardstick
An amendment to the Capital Markets Act introducing a "fair value" standard for merger pricing cleared the National Assembly's Political Affairs Committee in May. The amendment requires merger consideration to be determined by reference to a combination of share price, asset value, and earnings power, rather than relying primarily on market price alone. It takes effect three months after promulgation following a full plenary vote.
Lee Sang-heon, an analyst at iM Securities, said: "Once a merger is completed and the full intrinsic value of CJ Olive Young is reflected in the combined entity, CJ's valuation should re-rate materially upwards."
Financials
For 2026, iM Securities forecasts CJ to generate revenues of ₩46.834 trillion and operating profit of ₩2.572 trillion. The stock trades on a forward price-to-earnings ratio of 20.4 times.