[Click eStock] "CJ ENM, Commerce and Film Performance Decline" Target Price Down

[Asia Economy Reporter Ji Yeon-jin] Kiwoom Securities announced on the 13th that it has adjusted its earnings estimates for CJ ENM, considering the trend of increasing TVING subscribers due to higher content investment and the sluggish performance of commerce and movies, lowering the target stock price to 180,000 KRW.

Han-gyeol Lee, a researcher at Kiwoom Securities, explained, "Although the complete lifting of social distancing and other factors are being discussed, leading to expectations of concentrated deferred demand due to reopening, resistance to the changed consumption trends of movies and dramas caused by theatrical releases and OTT (Over The Top) platforms remains, making a sharp short-term recovery difficult to anticipate."

CJ ENM's first-quarter sales this year are expected to increase by 3% year-on-year to 816 billion KRW, while operating profit is projected to decrease by 38.7% to 57.5 billion KRW. Media operating profit is expected to plunge by 45.5%, and commerce is also anticipated to decline by 19.5%. Researcher Lee said, "Besides the profitability deterioration due to increased production investment in media, the sluggishness in commerce caused by a combination of factors such as market trend shifts led by digital commerce, TV home shopping's negative growth, and delivery issues is regrettable." He added, "The total merchandise value handled by commerce, which showed negative growth over the past two years, is also expected to slightly decrease due to the combined effects of TV's poor performance and economic instability such as inflation. Although stable, it is unlikely to drive growth."

However, the content division, which will invest 860 billion KRW this year, considers the expansion of the top line through the increase in TVING subscribers as most important. Since the subscriber expansion through Naver Plus Membership and subsequent subscription fee upselling strategies were effective, if subscriber attraction to TVING is possible through the content alliance with KT, an ideal improvement in the strategic subscriber acquisition plan for TVING is expected.

Researcher Lee stated, "The multi-studio system, which was the most important part of the mid-to-long-term strategy, has been completed." He added, "It is expected to lead the strengthening of the company's media capabilities by expanding not only content production but also original IP development. Additionally, there is room for further earnings improvement due to changes in estimates reflecting the first-quarter deal closing of Endeavor Content in the U.S. not yet reflected in the results."

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