[Click eStock] "CJ ENM, Weak 1Q Performance Despite US Endeavor Acquisition... Target Price Down"

[Asia Economy Reporter Lee Myunghwan] Hana Financial Investment announced on the 12th that it maintains a buy rating on CJ ENM but lowers the target price by 17% from the previous 175,000 KRW to 145,000 KRW. This is due to the poor performance of the U.S. Hollywood production studio 'Endeavor Content,' acquired last year, and the stagnation in paid subscriber growth of the online video streaming service (OTT) platform TVING.

The company's sales in the first quarter of this year increased by 21% year-on-year to 957.3 billion KRW, while operating profit decreased by 47% to 49.6 billion KRW. The operating profit was lower than the market forecast of 65.6 billion KRW. The sales and operating profit of the subsidiary Endeavor, reflected for the first time in the consolidated results, were 117.1 billion KRW and -17.8 billion KRW respectively, showing poor performance, which was analyzed as an effect of fixed costs becoming prominent due to delays in content production.

Looking at the existing segment operating profits, media decreased by 38% year-on-year to 33.3 billion KRW. Operating profit excluding Endeavor and Studio Dragon was around 25 billion KRW; TV and digital grew by 8% and 56% respectively, but costs became prominent due to stagnation in TVING's growth. The commerce segment's operating profit declined by 62% year-on-year to 12.9 billion KRW due to a decrease in transaction volume following the reopening, showing poor performance. The film segment's operating profit also recorded a continued deficit of -9.4 billion KRW compared to last year, partly reflecting the poor performance of U.S. releases and losses from Endeavor.

Despite spending about 900 billion KRW to acquire Endeavor Content, Hana Financial Investment evaluated the first-quarter performance as poor. Since it is a U.S. production company, expectations for performance inevitably arise with a lag. One of the main reasons for this year's negative growth guidance is the stagnation in paid subscriber growth of TVING compared to the end of last year. Researcher Lee Kihoon of Hana Financial Investment pointed out, "Since the two biggest growth pillars are underperforming, it is necessary to monitor related indicators."

However, the researcher also said, "With improvements in the film and music sectors due to reopening, profits will improve as we move into the second half of the year," and added, "If the growth momentum of Endeavor and TVING recovers, there is significant potential for investment sentiment to improve from the current stock price."

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