Advertising Stocks Stretch Out... "They Will Rise Further"

Companies Fully Resume Marketing
Jeil Planning and Innocean Target Price Raised

[Asia Economy Reporter Park Jihwan] The stock prices of advertising companies are showing a clear upward trend as expectations for earnings rise with the full-scale economic recovery. Until now, marketing activities of companies had been restrained due to the impact of COVID-19, leading to bleak earnings forecasts. However, recent resumption of spending by major advertisers has confirmed a rapid increase in profits, according to analysis.

According to the Korea Exchange on the 11th, Cheil Worldwide's stock price rose 15.5% from May until the previous day. During this period, the stock price jumped from the 21,000 KRW range to the 25,000 KRW range. Innocean's stock price also increased by 9.3%, from 59,900 KRW to 65,500 KRW. On the morning of the same day, both companies were trading in a narrow range due to fatigue from the previous rise. Notably, from the second quarter of this year, the outlook for earnings improvement in the advertising sector is prominent due to the resumption of spending by major advertisers. Cheil Worldwide's consolidated operating profit for the first quarter recorded 41 billion KRW, a 34.2% increase compared to the same period last year. The second quarter is expected to see more than a 30% profit increase along with record-high earnings. According to financial information provider FnGuide, Cheil Worldwide's second-quarter sales and operating profit are forecasted to increase by 20.24% and 26.58% year-on-year to 772.9 billion KRW and 68.1 billion KRW, respectively.

Innocean is also expected to see a full-scale earnings recovery. In the first quarter, Innocean experienced a more than 25% decrease in operating profit compared to the previous year due to a semiconductor supply shortage that led to reduced advertising spending by major clients, including automobile brands. However, in the second quarter, benefits are expected as advertising campaigns for Hyundai Motor's Genesis and the launch of the electric vehicle lineup Ioniq 5 are in full swing. Innocean's second-quarter sales are expected to reach 298.4 billion KRW, up 26.2% year-on-year, and operating profit is forecasted to surge 75.6% to 28.1 billion KRW.

Target price upgrades by securities firms are also continuing. Meritz Securities raised the target price for Cheil Worldwide from 26,000 KRW to 29,500 KRW, a 13.5% increase. KTB Investment & Securities raised it from 26,000 KRW to 30,000 KRW, a 15.4% increase. Kiwoom Securities raised the target price for Innocean from 80,000 KRW to 83,000 KRW, a 3.8% increase. Hong Sejong, a researcher at Shinhan Financial Investment, said, "Innocean has a rapidly improving advertising market, resumption of spending by major advertisers, and still significantly undervalued valuation levels," adding, "there is still ample room for growth."