[Click eStock] "CJ CGV, Earnings Recovery Expected... Capital Expansion for Advancement and Financial Structure Improvement"

Daishin Securities maintained a buy rating and a target price of 13,000 KRW for CJ CGV on the 30th, projecting that next year's profits could recover to 120% of those in 2019.

CJ CGV's operating profit in the first half of the year turned positive at 1.7 billion KRW, marking a turnaround after four years. First-half sales were recorded at 75-112% of 2019 levels. The previously sluggish performance in China during the first half also achieved a record high last month. Due to increased demand for differentiated experiences, 4DX is expected to achieve record-high sales and profits this year. The proportion of original content for the highly profitable 4DX has also increased.

This year's expected operating profit is 84 billion KRW, which is 69% of the 2019 level. Next year's projected operating profit is forecasted at 140 billion KRW, approximately 120% of 2019.

Additionally, CJ CGV plans to modernize theater operations and improve its financial structure through a capital increase of 900 billion KRW.

Researcher Kim Hoejae of Daishin Securities stated, "Upon completion of the approximately 900 billion KRW capital increase, the debt ratio is expected to improve from 1045% in Q2 this year to about 323%, and about 122% excluding lease liabilities, with a further credit rating upgrade anticipated."

He added, "The special theater market share in the Korean film market was 6.5-7.9% from 2017 to 2019 and has been 21% since last year. Of the raised funds, 100 billion KRW will be invested in facility modernization, with Olive Networks playing an IT role. Theaters are attempting differentiation through premium special theaters, technology special theaters, and new luxury theaters."

Researcher Kim also noted, "Since the application of lease accounting from 2019, net profit has decreased," adding, "Theoretically, net profit increases once half of the contract period has passed."

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