[Click eStock] "CJ CGV Overcomes Pandemic Impact... Records All-Time High Performance"

Daishin Securities maintained a buy rating and a target price of 10,000 KRW for CJ CGV on the 31st, stating that theaters are rapidly normalizing.

CJ CGV's sales in the third quarter of this year increased by 1% year-on-year to 410 billion KRW, and operating profit surged by 296% to 30.5 billion KRW. The operating profit approached 31 billion KRW recorded in the third quarter of 2019, and excluding the impact of the COVID-19 pandemic and accounting costs related to Turkey's hyperinflation, it was about 35 billion KRW, marking an all-time high performance. Additionally, the pre-tax profit of 21.9 billion KRW marked the first profit since the first quarter of 2018, which was also considered significant.

Domestic operating profit recorded 13.1 billion KRW. Although the number of viewers in the third quarter was 36 million, which was lower than expected, this was attributed to some of the Chuseok holiday being reflected in October. The cumulative number of viewers reached 98 million, which is 54% of the 2019 level, and the cumulative box office recovered to 1 trillion KRW, reaching 65% of the 2019 level.

In China, results exceeded expectations with sales of 97.8 billion KRW, the second highest ever, and operating profit and operating margin reached record highs at 14.6 billion KRW and 14.9%, respectively. Performance in China had recovered to 70% of the 2019 level in 2021, immediately after the pandemic, but suffered last year due to policy and political issues. This year, a full normalization has been observed. Considering that CJ CGV's stock price historically reacted significantly to profit and loss improvements in China, the record-high performance in China is expected to have a positive outlook for the stock price.

Operating profits in Turkey and Indonesia maintained a positive trend at 100 million KRW and 1.7 billion KRW, respectively. 4DX achieved 5.5 billion KRW, and with an increase in consumers visiting special theaters and rising demand for CJ CGV's original content, 4DX's performance was judged to have leveled up.

Researcher Kim Hoejae of Daishin Securities explained, "Although domestic audience numbers were somewhat disappointing compared to expectations, this was due to many older films that could not be screened during the pandemic being released." He added, "However, as more new releases are increasing, the number of Korean viewers is expected to recover to 140 million next year, reaching 63% of the 2019 level."

He continued, "Upon completion of the in-kind contribution of CJ OliveNetworks, the debt ratio is expected to improve significantly from 1052% in the second quarter of this year to around 370%. Excluding lease liabilities, it is about 140%." Researcher Kim also stated, "The issuance price of the rights offering was 5,560 KRW, with 73% of shareholders subscribing through rights. The current stock price, having overcome the pandemic, is excessively undervalued even considering the overhang."

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