Establishing Itself as a 'Digital Powerhouse'... Cheil Worldwide Feels Promising

Rapid Digital Transformation in Response to COVID-19
High Expectations for E-commerce Expansion

[Asia Economy Reporter Kum Boryeong] Cheil Worldwide, established as a 'digital powerhouse,' is raising expectations for growth by swiftly responding to the market changes brought about by the novel coronavirus disease (COVID-19).

According to Cheil Worldwide on the 27th, the proportion of digital business accounted for 43% as of the third quarter this year. This share, which was 19% in 2010, steadily grew to 23% in 2013, 30% in 2016, and 39% last year.

This strength demonstrated great capability in the face of market changes caused by COVID-19. Although face-to-face activities such as offline exhibitions, events, promotions, and sales decreased due to the ongoing impact of COVID-19 since early this year, the company quickly shifted to digital sectors such as e-commerce and dot-com services, showing solid performance. Operating profit in the third quarter was 59.5 billion KRW, a 12.9% increase compared to the same period last year. Compared to the previous quarter, it grew by more than 10%, showing a recovery trend from the second quarter, which was the lowest point hit directly by COVID-19.

Recently, they launched an experiential e-commerce service called 'GETTT.' This service allows customers to try products and brands directly through a rental method, helping them find their personal preferences. Hyunji Lee, a researcher at Eugene Investment & Securities, said, "GETTT is still in its early stages and does not yet contribute to profitability, but it is significant that they launched their own platform directly operated rather than just managing advertisers' commerce platforms." She added, "They will strengthen data analysis capabilities crucial for targeted advertising by building a customer database."

Expectations for growth remain valid not only for the fourth quarter but also for next year. Samsung Securities estimated Cheil Worldwide's gross profit for next year at 1.2233 trillion KRW and operating profit at 242.6 billion KRW, projecting increases of 9.6% and 14.1%, respectively, compared to the previous year. Especially, as marketing volumes that had been sluggish in the first half begin to be executed, external growth is expected mainly in North America, China, and Southeast Asia, where digital transformation has been rapidly implemented. Minha Choi, a researcher at Samsung Securities, explained, "Profits have turned to an upward trend since the second half of this year, and next year, in addition to the base effect, digital transformation will lead to increased advertising orders primarily in North America, China, and domestically, driving gross profit growth."

The stock price also reflects expectations for growth. The closing price, which was 17,400 KRW on August 26, rose by 20.98% to close at 21,050 KRW the day before. During the same period, the KOSPI increased by 10.83%, from 2,369.32 to 2,625.91.