[Click eStock] "Cheil Worldwide to Show Growth in Digital Sector"

Kiwoom Securities Issues 'Buy' Investment Opinion and Sets Target Price at 29,000 Won... Closing Price on 14th at 16,700 Won

[Asia Economy Reporter Kum Boryeong] Cheil Worldwide is expected to show growth in the digital sector despite the difficulty in avoiding the impact of the novel coronavirus infection (COVID-19).

According to Kiwoom Securities on the 16th, Cheil Worldwide's first-quarter performance is estimated at an operating gross profit of 259.6 billion KRW and an operating profit of 28.7 billion KRW. Compared to the previous year, operating gross profit is expected to increase by 2.7%, while operating profit is expected to decrease by 10.7%.

Namsoo Lee, a researcher at Kiwoom Securities, explained, "Due to the deterioration in the global advertising sector, the consolidated subsidiaries' gross profit is expected to decline by 3.9% year-on-year to 190.2 billion KRW. However, for the headquarters, a reorganization of the affiliated advertising category, which accounts for 75% of the headquarters' base, is occurring, leading to balanced growth including the new media sector, and it is expected to achieve 69.4 billion KRW, a 27% increase compared to the same period last year." He added, "Due to the nature of the advertising business, the lead time for production of orders received in the first quarter is reflected, so cost reductions such as labor costs are not expected to be significant."

Lee's analysis suggests caution for Cheil Worldwide in the second quarter. Although there may be some cost reduction effects due to time lag in expenses in the second quarter, large-scale cost cuts are unlikely as companies are expected to change their advertising strategies to prepare for marketing after COVID-19.

Lee said, "It is considered a difficult period to expand advertising in the US and Europe, which were most severely affected by COVID-19, but defensive volumes centered on digital in the untact (contactless) era are expected to emerge." He added, "The high growth potential of digital, which has steadily increased since 2010 and accounted for 39% in 2019, and the stable retail proportion are points that reaffirm the company's business stability." Accordingly, consolidated operating gross profit and operating profit for this year are projected at 1.1917 trillion KRW and 206.5 billion KRW, respectively, representing increases of 2.3% and 0.3% compared to the previous year.

Kiwoom Securities gave Cheil Worldwide a 'Buy' investment rating with a target price of 29,000 KRW. The closing price on the 14th was 16,700 KRW.

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