[Click eStock] "CJ CGV, Unavoidable Impact from New Coronavirus... Target Price Downgraded"
[Asia Economy Reporter Oh Ju-yeon] Daishin Securities maintained a 'Buy' rating on CJ CGV but lowered the target price by 8% to 44,000 KRW, citing uncertainty in first-quarter earnings expectations due to the novel coronavirus infection (Wuhan pneumonia).
Kim Hoe-jae, a researcher at Daishin Securities, stated, "Since the novel coronavirus situation is ongoing, we have revised the annual audience growth forecast from a 1% increase year-on-year to a 1% decrease. Considering the high audience base from the first quarter of last year due to the movie 'Extreme Job,' domestic operating profit (OP) for the first quarter is expected to decline sharply by 79% year-on-year to 1.5 billion KRW."
The target price also reflects the suspension of all movie theater operations in China following government directives due to the novel coronavirus impact. Researcher Kim noted, "Temporary operational burdens on CGV China are inevitable. Currently, efforts are underway to minimize losses through rent negotiations with landlords, reducing labor costs by maintaining minimum staff, and rent reductions."
However, he mentioned that during previous outbreaks such as Severe Acute Respiratory Syndrome (SARS) and Middle East Respiratory Syndrome (MERS), audience numbers actually increased year-on-year, suggesting that concerns over domestic performance, which accounts for 50% of the total, may be excessive.
Hot Picks Today
Taking Annual Leave and Adding "Strike" to Profiles, "It Feels Like Samsung Has Collapsed"... Unsettled Internal Atmosphere
- There Is a Distinct Age When Physical Abilities Decline Rapidly... From What Age Do Strength and Endurance Drop?
- Trump: "Discussed Taiwan and North Korea with Xi Jinping... I Do Not See a U.S.-China Dispute"
- "After Vowing to Become No. 1 Globally, Sudden Policy Brake Puts Companies’ Massive Investments at Risk"
- On Teacher's Day, a Student's Gifted Cake Had to Be Cut into 32 Pieces... Why?
Researcher Kim added, "Rather than expanding new investments this year, the focus will be on strengthening profitability across all regions. Although we are lowering expectations considering the current domestic and international situation, from May onwards, several moderately successful films targeting 3 to 5 million viewers are scheduled to be released, so we expect performance to recover in the second half of the year." He further stated, "If the Chinese market also shows signs of recovery, it will be possible to normalize the temporarily lowered valuation."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
