[Click eStock] "CJ ENM Nears Completion of Business Structure Reorganization... Stock Price Expected to Stabilize"

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[Asia Economy Reporter Myunghwan Lee] Daishin Securities announced on the 15th that it maintains a buy rating and a target price of 180,000 KRW for CJ ENM. This is because the uncertainty regarding structural changes has been resolved with the completion of the business structure reorganization.

Daishin Securities forecasts the company's sales for the first quarter of this year to increase by 14% year-on-year to 910 billion KRW, while operating profit is expected to decrease by 34% to 61.9 billion KRW. The first quarter operating profit forecast by segment is ▲Broadcasting 33.1 billion KRW (down 39% YoY) ▲Shopping 34.4 billion KRW (up 2% YoY) ▲Film -9.2 billion KRW (continued deficit) ▲Music 3.7 billion KRW (down 41% YoY).

In the broadcasting segment, sales are expected to increase by 12% thanks to the high popularity of the drama "Seumulda-seot, Seumulha-na" and the recovery of TV advertising. However, operating profit is expected to decline as more than 200 billion KRW will be invested in content this year to expand the online video service (OTT) "TVING" business. The shopping segment is expected to perform poorly due to the off-season and the impact of the CJ Logistics strike. Although efforts are being made to strengthen digital areas such as mobile live commerce, it is explained that it will take time to see results.

The film segment saw about a 40% increase in audience numbers compared to last year, but since CJ ENM had no releases in the first quarter, it is still in the red. However, with major Hollywood blockbusters scheduled to be released starting in the second quarter, it is expected to turn profitable in the third quarter. The music segment's first-quarter performance is expected to decline somewhat due to the base effect of last year's online concerts by "JO1" and "IZ*ONE".

CJ ENM's business structure reorganization is considered to be in its final stage. More than half of the company's sales and profits come from the broadcasting business. To achieve structural growth in broadcasting, the platform's focus is shifting from traditional cable channels tvN and OCN to TVING, and the focus of content investment and production is expanding from domestic to global markets. Since the end of 2020, the expansion and launch of TVING, acquisition of Endeavor Content in the U.S., introduction of a multi-studio system, and partnership with KT Studio Genie have all been part of the business structure reorganization aimed at structural growth in broadcasting. With this reorganization entering its final stage, Daishin Securities believes it is time to calmly observe the results.

Researcher Kim Hoejae of Daishin Securities stated, "With the uncertainty regarding CJ ENM's structural changes resolved, the stock price is expected to enter a stable upward phase as subscriber growth and performance improvements of TVING, as well as domestic and international content production results, are confirmed."

He added, "Despite intensified competition due to increased content investment by domestic and international online video services (OTT), a valuation premium will be applied if subscriber growth remains steady."

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