[Click eStock] "Innocean, Performance Improvement Expected Through Digital Transformation and Securing Advertising Volume"

Eugene Investment & Securities Report

[Asia Economy Reporter Minji Lee] Eugene Investment & Securities maintained a buy rating and a target price of 75,000 won for Innocean on the 26th.

Eugene Investment & Securities expected Innocean's gross profit in the fourth quarter of last year to have increased by 9.1% year-on-year to 166.6 billion won. Operating profit was forecasted to decrease by 2.2% to 39 billion won. Despite the baseline burden from the volume effect of new car launches in the same period last year, it is expected to meet the raised consensus due to strong volume from affiliates.

The headquarters' gross profit is estimated to have decreased by 3.5% year-on-year to 45.2 billion won. The overseas segment is expected to have increased by 14.5% to 121.7 billion won. Hyunji Lee, a researcher at Eugene Investment & Securities, said, "Due to an increase in media agency volume from the expansion of new car product lines, there was a slight decrease compared to the same period last year," adding, "Overseas growth will continue, supported by the launch of the GV80 in the Americas, which accounts for the largest sales proportion."

This year, performance is expected to improve significantly compared to last year. Last year, due to the nature of the advertiser's products, digital transformation was not easy, making it difficult to respond quickly to uncertain external environments, and the burden of labor costs from the acquisition of Welcom at the beginning of the year led to inevitable profitability deterioration. This year, following Genesis, the addition of the Ioniq brand and Kia's CI change are included, raising expectations for a rapid performance turnaround.

Although overseas non-affiliates are affected by COVID-19, additional growth potential is expected to increase once advertiser marketing resumes. With the stabilization of the external environment, Welcom's top line is expected to recover, and full synergy effects are anticipated.

Researcher Hyunji Lee said, "It appears that they are actively considering mergers and acquisitions (M&A) to strengthen digital capabilities using cash assets amounting to 670 billion won at the end of the third quarter," adding, "If successful, an increase in corporate value is expected."