[Click eStock] "CJ ENM, Expected Deficit of 100 Billion KRW... Needs to Secure Profit Endurance"

Hana Securities Report

Hana Securities forecasted on the 8th that CJ ENM will experience a large deficit this year. Accordingly, they maintained a buy rating but lowered the target price from 125,000 KRW to 105,000 KRW.

Lee Ki-hoon, a researcher at Hana Securities, explained, “CJ ENM’s stock price is expected to rebound when the plans to improve the financial structure through workforce and production cost efficiency and the liquidation of non-core assets are reflected in the earnings, but in the first quarter, selling and administrative expenses actually increased.”

CJ ENM recorded sales of 949 billion KRW and an operating loss of 50.3 billion KRW in the first quarter. Compared to the same period last year, sales decreased by 1%, and operating profit turned to a loss. This was below the consensus estimate of 15.2 billion KRW.

In particular, the media platform segment struggled due to a 30% decrease in TV advertising amid a difficult business environment. TVING recorded a loss of about 40 billion KRW. In film and drama, Studio Dragon posted 21.6 billion KRW, but the absence of delivery from Fifth Season (-40 billion KRW) and poor box office performance of titles such as “Ghost” and “Count” were reflected. Music saw improvements with Kep1er’s comeback and Enhypen’s world tour, and commerce improved due to efficient marketing operations.

Lee said, “Last year, TVING’s operating loss was about 120 billion KRW, exceeding Studio Dragon’s operating profit of 65 billion KRW. Efficient production cost management at TVING is important, and recently, they plan to eliminate the Wednesday-Thursday drama slots and replace them with variety shows and TVING content. It is crucial to check from the second half of the year, when the amortization burden of original tentpole dramas is eased, whether ‘TVING + Studio Dragon’ turns positive.”

He pointed out, “There is concern about simply becoming a global intellectual property (IP) provider, which is why they are investing in TVING, but the online video service (OTT) industry has almost completed its global restructuring, with even Disney Plus, the second largest, aiming to turn profitable.” He added, “It is important to sell content to global OTTs and expand the tentpole season system.”

He continued, “This might be a separate issue from making good dramas. It is worth considering focusing on the variety shows they do best to first secure profit resilience domestically.”

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