[Click eStock] "CJ ENM Runs Without Sandbags... Operating Profit Expected to Reach 230 Billion Won This Year"

Expected Highest Operating Profit Since Merger in 2025
Tving and Fifth Season, Key Pillars of Performance Rebound
Film, Drama, and Music Businesses Anticipated to Boost Profitability

Daishin Securities analyzed on the 5th that CJ ENM shows a positive outlook based on improved performance and various growth drivers. It is expected that next year will see the largest operating profit ever since the merger. The investment opinion 'Buy' and the target stock price of 110,000 KRW were maintained. Additionally, CJ ENM was selected as the top preferred stock in the media sector. CJ ENM's closing price on the previous trading day was 87,100 KRW.

Kim Hoe-jae, a researcher at Daishin Securities, said, "CJ ENM's 12-month expected earnings per share (EPS) is 5,947 KRW, and a target price-to-earnings ratio (PER) of 19 times was applied." He added, "The expected operating profit (OP) for 2024 is 230 billion KRW, which is an increase of 240 billion KRW compared to the previous year, indicating a turnaround to profitability." The operating profit is expected to reach 300 billion KRW next year, marking the highest level since the 2018 merger of CJ E&M and CJ O Shopping.

The reason for heading toward the highest-ever performance next year is that all three underperforming factors are expected to be resolved. These had been considered 'sandbags' weighing down the company. The underperforming factors were the losses of 142 billion KRW and 65.5 billion KRW last year from TVING and Fifth Season, respectively, and the sharp decline in TV advertising performance due to a contraction in the advertising market. Researcher Kim said, "TVING is approaching the break-even point (BEP) as it heads toward 5 million subscribers by the end of 2024, and with the merger effect with Wavve, a profit improvement of about 200 billion KRW is expected." He added, "Fifth Season is expected to turn profitable this year (operating profit of 28.4 billion KRW) as all external factors causing production disruptions, such as strikes, have been resolved." TVING recently ranked first in daily usage time for the first time ever, surpassing Netflix, and its corporate value was estimated at up to 2 trillion KRW. This value was calculated by multiplying the estimated 4.53 million subscribers by the per-subscriber value of 507,000 KRW. Furthermore, regarding TV advertising, which had fallen excessively compared to GDP levels, it is expected to grow by 7.8% year-on-year due to a balloon effect in the first half of the year, consecutive drama hits such as "Queen of Tears" and "Running on Sunjae's Back," and additional effects from the Paris Olympics and interest rate cuts in the second half.

Researcher Kim also stated, "While experiencing performance slumps in 2022-2023, the business focus is shifting from media and commerce to movies, dramas, and music." He explained, "In movies and dramas, Fifth Season is becoming an important revenue source, and in music, the revival of audition programs, the transition to an exclusive system, and profitability improvements from global expansion are expected." Until 2021, media platforms and commerce accounted for 39% each, totaling 78% of overall sales. By 2026, the sales composition is expected to be 24% media platforms, 27% commerce, 35% movies and dramas, and 14% music. Particularly in terms of operating profit, the combined profit from movies and dramas (29%) and music (23%) is expected to exceed half of the total.

CJ ENM's competitiveness in the music business comes from two pillars: the music business through idols verified by audition programs and the so-called 'K Convention' business such as KCON and the MAMA Awards. In particular, the girl group 'ME:I,' which debuted through 'Produce 101 Japan Girls,' and the girl group debuting through Mnet's 'I-LAND 2' are expected to contribute to stable performance by operating under a 7-year exclusive contract system, unlike before. Kep1er, which enjoys top-level popularity in Japan, recently signed a renewal contract, becoming the first Mnet project group to do so. In movies and dramas, Fifth Season is expected to improve performance by supplying 25 works, double the amount from last year, and the struggling movie business aims for a rebound with 'Harbin' and 'Veteran 2,' which combine investment and distribution.

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