[Click eStock] "CJ ENM, Media and Music Divisions Underperform... Q4 Last Year Earnings Likely Below Market Expectations"

[Asia Economy Reporter Eunmo Koo] DB Financial Investment forecasted that CJ ENM would post earnings below market expectations due to weak performance in the media and music sectors in the fourth quarter of last year. The investment rating and target price were maintained at 'Buy' and 200,000 KRW, respectively.

Shin Eun-jung, a researcher at DB Financial Investment, estimated in a report on the 15th that CJ ENM's fourth-quarter sales last year increased by 2.0% year-on-year to 1.2224 trillion KRW. Operating profit for the same period was expected to decline by 2.9% to 67.4 billion KRW, falling short of market expectations (sales of 1.2529 trillion KRW, operating profit of 81.3 billion KRW).

The media and music sectors were identified as the main causes of the weak performance. Researcher Shin said, "Due to the continued burden of production costs and the stagnation of the TV advertising market, media operating profit is expected to be 19.3 billion KRW, down 5.7% from the same period last year, which is lower than expected. Music is also expected to record operating profit at the break-even point (BEP) level because there were no activities from 'X1' and 'IZ*ONE."

However, commerce was evaluated as stable. Sales of in-house brands showed high growth, and operating profit was expected to increase by 8.8% year-on-year to 33.2 billion KRW due to the winter peak season effect. The film sector's performance was also estimated to turn profitable with operating profit of 5.1 billion KRW, influenced by the U.S. release of 'Parasite' and additional licensing revenue from 'Bad Guys' and 'Exit.' Researcher Shin said, "It is positive that content production costs this year will not increase significantly compared to last year, but concerns remain due to advertising stagnation, music noise, and a high base in the film sector." Considering these factors, annual sales for this year are expected to increase by 4.7% year-on-year to 4.9626 trillion KRW, while operating profit is forecasted to decrease by 0.3% to 319.5 billion KRW.

The investment rating and target price were maintained at 'Buy' and 200,000 KRW, respectively. Researcher Shin explained, "Additional stock price gains will be limited until the profitability stabilization of the media and music sectors is confirmed. However, considering that the price-to-earnings ratio (PER) based on this year is 16 times, making it the most undervalued in the media industry, and that the value of its equity holdings alone exceeds 3 trillion KRW, the investment rating is maintained at 'Buy.'"

This content was produced with the assistance of AI translation services.