[Click eStock] "Cheil Worldwide Expected to Achieve Best Quarterly Performance in 3Q"

[Asia Economy Reporter Song Hwajeong] DB Financial Investment maintained a 'Buy' rating and a target price of 32,000 KRW for Cheil Worldwide on the 12th, expecting the company to record its highest quarterly performance in the third quarter of this year.

According to DB Financial Investment, Cheil Worldwide's third-quarter results are expected to show a gross profit of 313.2 billion KRW, up 12.5% year-on-year, and an operating profit of 68.6 billion KRW, up 15.4%, in line with market expectations (sales 313.2 billion KRW, operating profit 66.7 billion KRW). Shin Eunjeong, a researcher at DB Financial Investment, analyzed, "Despite concerns over a reduction in non-affiliated volume due to COVID-19, domestic gross profit is expected to grow 3% year-on-year as major advertisers continue marketing for foldable and Z Flip devices and home appliances." She added, "Overseas gross profit is also expected to grow 16.4% due to increased digital content and production in the Americas." The strengthening of social marketing and performance marketing by overseas subsidiaries is expected to sustain digital growth in the Americas through next year. Europe is also showing a recovery centered on digital in the UK and Germany, and China is estimated to have a steady increase in non-affiliated advertisers.

The fourth-quarter performance is also expected to be favorable. Researcher Shin said, "In the fourth quarter, high growth in digital in the Americas, pre-marketing for the China Winter Olympics, and continued marketing of home appliances by major advertisers are anticipated." She added, "Reflecting this, fourth-quarter gross profit is expected to increase 11% to 339.3 billion KRW, and operating profit to rise 15.9% to 70.9 billion KRW."

Despite the favorable performance, the stock price remains undervalued. Researcher Shin explained, "Qualitative growth continues by increasing the digital proportion of affiliated and non-affiliated businesses, and good performance growth is possible next year due to overseas digital growth and cost efficiency." She added, "Due to a decline in interest in the advertising sector, the valuation is undervalued at a price-earnings ratio (PER) of 14 times for this year and 12.9 times for next year, compared to the past four-year average of 20 times."