Mirae Asset raises CJ target price on Olive Young's overseas push

Mirae Asset Securities raised its target price for CJ Corporation (KRX: 001040) on 18th August, lifting it 6.4% from 156,000 won to 166,000 won, while reaffirming a buy recommendation. Based on the share price of 138,100 won as of 14th August, the implied upside is 20.2%.

The central rationale for the upgrade is a revised valuation of CJ Olive Young, the group's health and beauty retail chain. Mirae Asset shifted its valuation methodology from trailing EBITDA to a forward-looking 2026 EBITDA estimate, and raised the applied multiple from 9.0 times to 10.0 times. On that basis, CJ's attributable stake in Olive Young is valued at 5.7195 trillion won. The group's net asset value (NAV) stands at 9.7149 trillion won, implying that the current share price trades at a 55.5% discount to NAV.

The upgrade is not, however, an unambiguously positive signal. Two factors weighed on the target price: full dilution treatment for CJ's Class 4B preferred shares, and a larger deduction for holding-company overhead costs (1.1395 trillion won). These drags were more than offset by upward revisions to Olive Young's earnings estimates — driven by its overseas store expansion — and the higher valuation multiple.

Earnings miss at the group level

CJ's consolidated operating profit for the second quarter of 2026 came in at 531.8 billion won, down 14.1% year on year and 20.3% below the market consensus of 667.0 billion won. Revenue of 11.5281 trillion won was in line with expectations, but profitability fell short. Net profit attributable to controlling shareholders collapsed 62.9% year on year to 61.5 billion won.

The immediate culprit is the key subsidiary CJ CheilJedang, the food and bio-materials conglomerate. It reported operating profit of 257.6 billion won for the quarter but swung to a net loss of 13.5 billion won on a controlling-shareholder basis. Currency headwinds and elevated grain costs weighed on margins, while a recovery in selling prices for its bio-ingredients division lagged behind volume growth. A recurring pattern of below-the-line charges — financial costs and non-operating losses — again consumed operating gains, a structural weakness that has persisted for several quarters.

Olive Young: quality growth over quantity

Against that backdrop, Olive Young delivered conspicuously robust results. Standalone revenue for the second quarter reached 1.7977 trillion won, up 23% year on year. Offline sales grew 22% and online sales 25%. Notably, the domestic store count actually fell — from 1,393 to 1,367 outlets — yet revenue rose sharply, indicating that the growth was driven by higher productivity per store rather than simple network expansion.

For the first half of the year, Olive Young's estimated operating profit was 341.6 billion won, with an operating margin of 10.2%. That is 2.3 percentage points below its 2025 full-year margin of 12.5%, reflecting higher marketing expenditure to support overseas expansion and the disappearance of a one-off VAT refund that boosted the prior-year comparison.

Mirae Asset expects margins to recover in the second half. Olive Young is due to launch a B2B partnership with Sephora — a curated K-beauty range branded "K-Beauty Edit" — on 20th August, alongside two directly operated stores in Pasadena and the Westfield mall in Los Angeles, plus a dedicated US online store. These initiatives are expected to lift second-half operating margins to roughly 12.0%. On that basis, the brokerage forecasts full-year 2026 operating profit of 817.7 billion won, representing an annual margin of 11.2%.

Mixed performance across the group

Results across CJ's other subsidiaries were uneven. CJ ENM, the entertainment and media arm, saw revenue fall 8.3%, but operating profit improved to 33.4 billion won, supported by growth in subscribers at its streaming platform Tving, as well as its music and commerce businesses. CJ CGV, the cinema chain, reported a sharp recovery in operating profit to 11.5 billion won, helped by a rebound in domestic audiences and international expansion of its premium 4DPLEX screening format. CJ Freshway, the food-service distribution unit, saw profit fall 14.2% despite growth in its platform business, as it invested aggressively to gain early position in the online-to-offline catering market.

Key risks for investors

Several uncertainties deserve scrutiny. Most importantly, Olive Young's valuation is still based on the assumption that the company remains unlisted; the timing and likelihood of an IPO are uncertain. Mirae Asset's report explicitly states that no listing is assumed, which is why a 25% illiquidity discount remains embedded in the target price. Should an Olive Young IPO become more concrete, that discount could narrow and provide further NAV upside. Conversely, a prolonged delay would remove a key re-rating catalyst.

The structural health of CJ CheilJedang also matters. Because CJ Corporation is a holding company, its attributable earnings are directly tied to subsidiary performance. So long as CheilJedang continues to generate recurring non-operating losses that erode its operating profit, the pace at which Olive Young's growth translates into group-level earnings will remain constrained.

Valuation and forecasts

Mirae Asset forecasts CJ's full-year 2026 net profit at 43.2 billion won — roughly three times the 2025 estimate of 14.3 billion won, though modest in absolute terms. Full-year revenue is projected at 47.2950 trillion won, with operating profit of 254.8 billion won. Earnings per share are expected to rise sharply to 12,113 won from 4,019 won in 2025, compressing the forward price-to-earnings ratio to 11.4 times from an elevated 42.8 times in 2025.