[Click eStock] "Media Leads and Music Supports... CJ ENM 3Q Earnings Also 'Clear'"

OTT 'TVING' Sailing Smoothly... Idols Also Successively Hit the Mark

[Asia Economy Reporter Minwoo Lee] CJ ENM is expected to post solid earnings in the third quarter, surpassing market consensus. This is attributed to balanced growth in both music and online video services (OTT).

On the 13th, Samsung Securities estimated that CJ ENM would record consolidated sales of 871 billion KRW and operating profit of 80.2 billion KRW in the third quarter of this year. This represents growth of 9.1% and 12.9%, respectively, compared to the same period last year. The operating profit is also expected to exceed the market consensus of 73.9 billion KRW by about 10%.

Following the first half, the media division appears to have driven strong performance in the third quarter as well. Not only dramas such as "Hospital Playlist 2," "The Devil Judge," and "Hometown Cha-Cha-Cha," but also variety shows like "Street Woman Fighter," "You Quiz on the Block," and "Sixth Sense 2" generated buzz, positively impacting TV advertising revenue and increasing subscriber growth and retention rates for the OTT service "TVING," according to analysis.

In the music division, JO1 released their 4th single album "Stranger" in August, which is expected to be reflected in the earnings. The release of their 5th single album in mid-December is also anticipated to continue a stable profit growth trend. Commerce is expected to see a decline in profits, considering the special demand during the COVID-19 pandemic in the same period last year and ongoing business restructuring due to digital transformation strategies.

Particular attention was drawn to the OTT service "TVING." It was evaluated that content strengthening and differentiation were achieved through highly popular variety shows like "Transit Love," live broadcasts of Euro 2020, and the release of special videos for "Street Woman Fighter." Minha Choi, a researcher at Samsung Securities, explained, "They are fully leveraging their strengths as a business operator simultaneously running TV and OTT with a content cross-programming strategy," adding, "They are actively attracting new subscribers through a strategic partnership with Naver." At the end of last year, the number of paid subscribers for TVING was around 700,000, but it is estimated to reach 1.7 to 1.8 million by the end of the third quarter this year.

The music business is also growing. The group "ENHYPEN" has pre-orders for their first full-length album reaching approximately 930,000 copies. New girl groups will continue to be launched steadily through audition programs. By investing in the K-pop community platform developer "Stage Labs," it is expected that a digital platform for the music division will be established by the first half of next year.

Against this backdrop, Samsung Securities maintained a "Buy" investment rating and a target price of 225,000 KRW for CJ ENM. The closing price on the previous day was 168,500 KRW. Researcher Choi analyzed, "The media business is increasing subscribers through differentiated moves from the world’s number one operator Netflix, based on long-standing know-how and industry network as a broadcasting production company. Commerce and film divisions are also expected to grow and recover," adding, "By expanding and utilizing proprietary intellectual property (IP), they will target the global market, leading to strengthened mid- to long-term market influence and improved earnings."