[Click eStock] "CJ ENM Chooses External Growth"

Strong Q2 Performance Driven by Broadcasting Sector
Daishin Securities Maintains CJ ENM Target Price at 210,000 Won

[Asia Economy Reporter Gong Byung-sun] CJ ENM posted strong earnings in the second quarter of this year, driven by the robust performance of its broadcasting division. As CJ ENM plans to actively invest in content for its online video service (OTT) TVING starting in the second half of the year, whether the company achieves external growth is considered a key investment factor.

According to Daishin Securities on the 6th, CJ ENM's sales in the second quarter increased by 8% year-on-year to 910 billion KRW, and operating profit rose by 17% over the same period to 85.8 billion KRW. These figures exceeded market consensus estimates of 883 billion KRW in sales and 83 billion KRW in operating profit by 3.06% and 3.37%, respectively.

The strong performance of the broadcasting division, which accounted for 47% of total sales last year, contributed to the solid results. The broadcasting division's second-quarter sales rose 12% year-on-year to 460 billion KRW, and operating profit surged 132% to 57.7 billion KRW, marking the highest profit ever recorded for a second quarter. Among this, TV advertising sales, which had been sluggish last year, quickly recovered with a 25% growth in the first quarter and a 30% increase in the second quarter. Digital advertising sales also achieved high growth, increasing by 55% compared to the same period last year.

Advertising rates are also rising. The average advertising rate at 10 PM increased by 6% year-on-year to 13.9 million KRW, marking growth for the first time in five quarters. The average advertising rate at 11 PM rose 12% over the same period to 11.7 million KRW, showing continuous growth for nine consecutive quarters.

Daishin Securities highlighted the growth of TVING. CJ ENM plans to actively pursue external growth through content investment in TVING starting in the second half of the year. With a target of 8 million paid subscribers by 2023, if TVING achieves this goal within three years, it is expected that its corporate valuation could surpass that of Netflix.

However, the large-scale investment exceeding 500 billion KRW is expected to be a short-term burden. Kim Hoe-jae, a researcher at Daishin Securities, said, “The increased investment costs and profit burden, along with the launch of Disney Plus in the second half of the year and the emergence of competitors, are concerning factors,” adding, “This will act as a short-term pressure on the stock price.”

Accordingly, Daishin Securities maintained its ‘Buy’ rating on CJ ENM with a target price of 210,000 KRW. The closing price on the previous day was 165,100 KRW.