[Click eStock] "Cheil Worldwide Expected to Sustain Performance Improvement Through Digital-Centered Growth"

On the 15th, Daishin Securities maintained a buy rating and a target price of 33,000 KRW for Cheil Worldwide, stating that despite concerns about economic contraction, the marketing expenditures of major advertisers remain solid, and performance improvement is expected to continue through the discovery of non-affiliated advertisers and growth centered on digital.

Researcher Kim Hoe-jae of Daishin Securities explained, "In the first quarter of this year, advertising expenses across four media (terrestrial TV, radio, newspapers, magazines) reached 550 billion KRW, down 18% compared to the same period last year," adding, "The contraction rate is larger than the -8% in Q1 2020 and -14% in Q2 2020 during the early pandemic, but smaller than the -28% to -23% from Q4 2008 to Q2 2009 during the financial crisis."

Terrestrial TV advertising recorded 160 billion KRW, a 40% decrease. This contraction rate is the largest ever, exceeding those during the early pandemic and financial crisis.

Since advertising moves in tandem with Gross Domestic Product (GDP), it is natural for advertisers' budgets to shrink if GDP forecasts are poor. However, the economic situation in Korea this year is not bad enough to cause a 40% contraction in terrestrial TV advertising. If the annual contraction rate for terrestrial TV this year is estimated at around -12% in 2009 and -12.8% in 2019, it is expected that after contractions of about -40% in Q1 and -30% in Q2, the second half of the year will see a shift to net growth of 2-5%.

Researcher Kim said, "The Bank of Korea's forecast for Korea's GDP growth rate this year is 1.4%, which is better than the US at 1.1% and the Eurozone at 0.7%," adding, "The year-to-date stock price increases for the global top 1-3 ad agencies operating in the US and Europe are WPP 12%, Omnicom 17%, and Publicis 24%, whereas Korean advertising agencies' stock price increases are sluggish, with Cheil Worldwide at -14% and Innocean at -3%."

He continued, "The digital segment accounts for 53% of Cheil Worldwide's performance, with digital achieving a 14% increase in the first quarter compared to the same period last year," adding, "In contrast, the performance directly linked to domestic terrestrial TV is estimated to be less than 10%." He also noted, "Since terrestrial TV advertising is likely to shift to net growth in the second half of the year, both Cheil Worldwide's performance and stock price are expected to improve."

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