[Click eStock] CJ ENM, Positive Signs on Withdrawal of Physical Division and Expectations for Earnings Increase to Watch

[Asia Economy Reporter Lee Seon-ae] Hana Financial Investment maintained its buy rating and target price of 175,000 KRW for CJ ENM on the 25th. Assuming the Season-Tving merger and production costs remain steady, there is potential for about a 15% upward revision in operating profit this year, which is interpreted as a sign of further earnings growth.

Although the withdrawal of the physical division was announced, the earnings decline guidance for 2022 due to accelerated investment in Tving remains a concern. The biggest challenge is that while in-house content has achieved tremendous global success, production costs have increased proportionally, but the revenue structure relies on low-growth domestic industries such as TV advertising and theater sales to cover these costs. Therefore, the global expansion of Tving, whose subscribers tripled last year, must be accelerated, which has led to the earnings decline guidance.

Lee Ki-hoon, a researcher at Hana Financial Investment, said, "The announcement of the withdrawal of the physical division is positive, but the stock price ultimately depends on how quickly the investment recovery period arrives." He added, "We initially expected this around mid-next year, but since there is potential for an upward revision this year, we need to monitor the subsequent stages."

Meanwhile, a recent announcement mentioned KT's decision to invest 100 billion KRW in Studio Genie, a content investment and production company, highlighting plans to strengthen content competitiveness in the OTT business. The expected synergy likely involves reducing production cost burdens through the merger (or maximum cooperation) of Season and Tving, and promoting subscriber growth through bundled products. The researcher predicted, "KT is expected to alleviate production cost burdens and secure stable supply of global IPs, while Tving is anticipated to absorb about 1 million MAU (a 50% increase compared to subscribers at the end of last year), showing high growth."

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