[Click eStock] "Cheil Worldwide, Quick Profit Leverage Expected with Industry Improvement... Target Price Down"

Target Price Downgraded from 28,000 Won to 26,000 Won

Shinhan Investment Corp. on the 29th downgraded the target price of Cheil Worldwide from 28,000 KRW to 26,000 KRW, expecting the earnings trend to improve in the second half compared to the first half. The investment rating was maintained at 'Buy.'

Ji In-hae, a researcher at Shinhan Investment Corp., explained, "The target price was slightly lowered by reducing the profit estimate by 7% due to increased costs in the first half, but the investment rating remains a buy because if the industry conditions improve, the fastest earnings leverage is expected."

Cheil Worldwide's gross profit in the first quarter of this year increased by 7% year-on-year to 390.7 billion KRW, and operating profit rose by 2% to 54.5 billion KRW, meeting market expectations. Researcher Ji analyzed, "Despite the lack of improvement in the economy and unfavorable conditions necessary for the recovery of the advertising industry, and the continued high-intensity marketing budget efficiency efforts by advertisers, the company maintained its growth trend through non-affiliated, non-media advertising (BTL), and digital advertising volume," adding, "The proportion of digital advertising, which is in high demand by advertisers, rose to 54%." However, selling and administrative expenses increased due to higher labor costs. Ji said, "Labor costs increased by 10%, causing selling and administrative expenses to rise by 8%, as proactive investments have continued since last year to strengthen digital competitiveness and attract new advertisers," explaining, "This is why operating profit only grew by 2%."

Performance in the second half is expected to improve compared to the first half. Researcher Ji forecasted, "The second quarter is a traditional peak season, so performance improvement compared to the previous quarter is certain," but added, "However, since there is no major trend reversal in the domestic and international environment and investment in personnel costs will continue, the earnings trend is expected to improve in the second half compared to the first half." He continued, "In the second half, the pillars of growth in digital, non-affiliated, and BTL advertising will continue, advertising volume will expand due to the Paris Olympics in July, and the focus will be on improving the efficiency of selling and administrative expenses centered on personnel rather than additional hiring, so the guidance of 5% annual gross profit growth and profitability defense targets is maintained."

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