[Click eStock] "Jeil Gicheok Expected to Continue Growth in Second Half, No.1 Premium Should Be Reapplied"

Benefits from the Surge in Demand for Expanding Digital Channels and New Marketing

[Asia Economy Reporter Minwoo Lee] After announcing record-breaking performance in the second quarter, Cheil Worldwide's stock price had been sluggish due to growing concerns about further increases. However, there is an analysis that the company can continue its growth trend in the second half of this year. This is based on the judgment that it can benefit from the increased demand for digital channels and new marketing following the COVID-19 pandemic.

On the 23rd, Hanwha Investment & Securities maintained a 'Buy' rating on Cheil Worldwide with this background and raised the target price by 14.8% to 31,000 KRW. The closing price on the previous trading day was 22,350 KRW.

Researcher So-hye Kim of Hanwha Investment & Securities said, "Recently, Cheil Worldwide's stock price fell amid expanding macroeconomic uncertainties and concerns about additional upward factors following its very strong earnings growth. While traditional media advertising (ATL) revenue and gross profit related to media agency services are steadily maintained at around 240 billion KRW annually, the addition of new business areas will lead to earnings growth," she predicted.

In particular, the environment where demand for digital channels and new marketing has surged since the spread of COVID-19 is favorable for Cheil Worldwide. Researcher Kim explained, "Cheil Worldwide has already built a diverse portfolio of digital businesses such as dot-com business and e-commerce. The valuation premium that Cheil Worldwide, as the number one player with roughly twice the gross profit scale compared to competitors, has received should be reflected again."

Hanwha Investment & Securities forecast that Cheil Worldwide will record a gross profit of 309.1 billion KRW and an operating profit of 67.1 billion KRW in the third quarter of this year, exceeding market expectations. Domestic and overseas gross profits are expected to increase by 7% and 12.6% respectively compared to the same period last year. The digital proportion of total gross profit is also expected to rise from 43% last year to 50% this year.

Researcher Kim said, "Cheil Worldwide's stock price has a high valuation attractiveness with price-to-earnings ratios (PER) based on expected earnings for this year and next year at about 14 times and 13 times respectively. Operating profits in the third and fourth quarters are expected to increase by 13% and 17% year-on-year respectively. Moreover, despite external uncertainties, the company's ability to flexibly respond to advertisers' shifting marketing budgets is a factor that could raise the multiple," she analyzed.

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