[Click eStock] CJ ENM, the Strength of a Native OTT Platform

[Asia Economy Reporter Lee Seon-ae] Meritz Securities announced on the 14th that it maintains a buy rating and a target price of 220,000 KRW for CJ ENM.

It forecasts consolidated sales and operating profit for 2022 at 3.6829 trillion KRW (+4.6% YoY) and 385.2 billion KRW (+7.7% YoY), respectively. As of the end of 2021, Tving's paid subscribers are estimated at 2.3 million, a 224.2% increase compared to the previous year, achieving remarkable results despite concerns over the domestic launch of Disney Plus. Since Tving's subscriber growth was driven mainly by variety shows, sports, and original content with low production costs, it is expected to positively contribute to profitability.

Although the slow recovery of the domestic box office is somewhat disappointing, the music business is positive as , , and have built strong fandoms, and 's first album surpassed 200,000 copies in initial sales, indicating strengthened in-house artist capabilities.

Researcher Jeong Ji-su of Meritz Securities stated, "Although the physical division due to the multi-studio strategy negatively affected the stock price, it is highly likely to create business synergies in a direction that considers shareholder value during the restructuring process."

Meanwhile, consolidated sales and operating profit for Q4 2021 are expected to be 962.7 billion KRW (+2.0% YoY) and 90.4 billion KRW (+2.8% YoY), respectively, falling short of market consensus (operating profit 94.4 billion KRW). Media business sales are projected at 504.3 billion KRW (+6.6% YoY), with operating profit at 57.8 billion KRW (+38.1% YoY) due to increased production costs. Despite a high base effect, TV and digital advertising are expected to grow by 6.4% and 12.5% YoY, respectively. The commerce business is expected to record an operating profit of 32 billion KRW (-34.9% YoY), compensating for decreased TV handling volume due to digital transition with a margin improvement strategy focused on in-house brand products. The film segment is expected to post a slight loss (-8.7 billion KRW) due to continued box office sluggishness, while the music business is forecasted to achieve an operating profit of 9.3 billion KRW (+937.4% YoY) thanks to album performances not only from and but also from .