[Click eStock] "Contentsree Joongang, Q1 is the bottom... Performance will improve"

[Asia Economy Reporter Myung-Hwan Lee] Hana Financial Investment announced on the 9th that it maintains a buy rating and a target price of 70,000 KRW for Contentree Joongang. Although the first-quarter earnings this year were weaker than expected, quarterly performance improvement is anticipated.

On a consolidated basis, Contentree Joongang's first-quarter sales this year were 135.6 billion KRW, up 13% year-on-year, while operating loss continued at 31.8 billion KRW (deficit), according to preliminary estimates. In particular, the operating loss was larger than the market forecast of 12.7 billion KRW. On a separate basis, sales and operating profit were 77.5 billion KRW and 700 million KRW, respectively. Hana Financial Investment explained that these figures represent declines of 8% and 95% year-on-year, indicating poor performance. The consolidated operating loss of production companies expanded to 11.9 billion KRW, which is presumed to be due to various one-time expenses.

The film division recorded sales and operating losses of 22.5 billion KRW and -19.1 billion KRW, respectively. These figures represent a 25% increase in sales year-on-year but continued losses, reflecting poor performance. The box office was weak due to a surge in COVID-19 cases caused by the spread of Omicron.

However, the film division is expected to see significant improvement. Contentree Joongang operates the multiplex 'Megabox.' The film division, which had been recording losses of around 15 billion KRW each quarter, is expected to improve rapidly as in-theater dining was permitted starting from the 25th of last month, and major releases such as 'Doctor Strange 2' and 'The Outlaws 2' this month, and 'Top Gun 2' in June have been confirmed, Hana Financial Investment predicted. Starting with 'The Outlaws 2,' major subsidiaries such as BA Entertainment and Climax are preparing to release eight films, making it possible to turn profitable by the third quarter at the latest.

Researcher Ki-Hoon Lee of Hana Financial Investment said, "Although the first quarter was significantly weaker than expected, from the second quarter onward, momentum from various online video service (OTT) programming and film lineups is expected to lead to quarterly performance improvements starting from the first quarter low." He added, "While short-term stock prices may be weak, the opinion that it is a buying opportunity below a market capitalization of 1 trillion KRW remains unchanged in the mid to long term."

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