[Click eStock] "Cheil Worldwide, a Growth Stock Not Defensive... Top Pick in the Industry"

[Asia Economy Reporter Kwon Jae-hee] Hanwha Investment & Securities maintained a 'Buy' rating on Cheil Worldwide on the 29th and raised the target price by 7% from the previous level to 36,000 KRW.

Cheil Worldwide posted strong first-quarter results with a gross profit of 334.9 billion KRW and an operating profit of 58.5 billion KRW, representing growth of 23% and 43% respectively compared to the same period last year. All business segments exceeded market expectations both domestically and internationally. Domestic gross profit grew 17% year-on-year. In addition to wireless flagship products, major advertisers conducted various branding enhancement marketing campaigns extensively across both media and digital platforms, with a significant influx of non-affiliated advertisers. Overseas gross profit grew 25% as major advertisers continued to expand their agency scope. Despite ongoing investments in new business personnel, top-line growth offset these costs, resulting in a 43% increase in operating profit to 58.5 billion KRW compared to the same period last year.

Hanwha Investment & Securities forecasts that Cheil Worldwide's gross profit and operating profit will increase by 18% and 29% respectively this year compared to last year. The growth trend in the North American region, where the digital agency domain is expanding based on regional marketing references, is expected to continue. The pace of expansion in non-affiliated advertiser volume is anticipated to accelerate through the acquisition of non-affiliated advertisers globally, including headquarters and China. Furthermore, amid recent external uncertainties, advertisers focusing on marketing efficiency and ROAS improvement are expected to highlight the company's competitiveness. Meanwhile, the company is reviewing M&A opportunities domestically and internationally using approximately 470 billion KRW in net cash, which, if successful, is expected to simultaneously drive earnings growth and multiple expansion.

Kim So-hye, a researcher at Hanwha Investment & Securities, stated, "Despite external uncertainties, proactive business structure reorganization has heightened expectations for structural growth," adding, "It is time to assign a valuation befitting a growth stock rather than a defensive stock, making it the top pick within the industry."

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