[Click e Stocks] "Cheil Worldwide Lowers Operating Profit Estimate by 7%... Target Price Down 11%"

[Asia Economy Reporter Park Ji-hwan] DB Financial Investment evaluated on the 11th that Cheil Worldwide Cheil Worldwide is inevitably revising downward its operating profit estimate for this year by 7.2% due to the deteriorating business environment caused by the novel coronavirus infection (COVID-19). However, it maintained a 'Buy' investment rating, stating that the negative impact of COVID-19 on the advertising industry has already been reflected in the stock price. Cheil Worldwide's target stock price was lowered by 10.71% from the previous 28,000 KRW to 25,000 KRW.

Shin Eun-jung, a researcher at DB Financial Investment, stated, "Despite the slowdown in the advertising market, the gross profit for the second quarter is expected to grow by 2.9% year-on-year due to the digital transition of traditional media and the volume execution by major advertisers," she said.

The consolidated subsidiary GP is expected to decrease by 4.2% due to the impact of COVID-19. In the first quarter, overseas subsidiaries only achieved 0.4% growth year-on-year due to China's economic recession and various agency volume reductions caused by COVID-19 in Europe. Considering that the impact of COVID-19 on overseas markets became significant from March to May, the second quarter is expected to show poor performance mainly in Europe and the Americas.

A positive aspect is that despite the overall contraction in advertising scale, the shift to digital execution is happening rapidly. The digital share, which accounted for an average of 39% last year, recorded 41% in the first quarter alone. It is expected to maintain around 40% in the second quarter as well.

Researcher Shin said, "Reflecting the impact of COVID-19, we have revised downward the operating profit estimate for this year by 7.2%," adding, "It is true that the advertising industry is negatively affected by COVID-19, and therefore this has already been reflected in the stock price."

Shin also evaluated, "Recently, the stock price of the advertising sector seems to be consolidating due to uncertainty about the performance in the second and third quarters," but "it has an advantage over competitors as it has a high digital share and has recently expanded its digital advertising business area by acquiring the Chinese social big data analysis specialist 'ColourData'."

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