[Click eStock] "Cheil Worldwide, Quality Growth to Continue Next Year"

One-time labor costs of about 6 billion KRW reflected in Q4 last year
Meritz Securities "Jeil Planning target price maintained at 33,000 KRW"

[Asia Economy Reporter Gong Byung-sun] Cheil Worldwide is expected to report fourth-quarter earnings last year that slightly missed market consensus due to one-time labor costs. However, the earnings improvement trend that began in the first quarter of 2021 is expected to continue next year.

On the 14th, Meritz Securities estimated Cheil Worldwide's gross profit for the fourth quarter of last year at 335.7 billion KRW, up 9.8% year-on-year, and operating profit at 67.1 billion KRW, up 9.7% over the same period. The operating profit is about 4.14% below consensus.

Excluding one-time labor costs, this represents the highest quarterly gross profit and operating profit. It is estimated that about 6 billion KRW in one-time special incentives were reflected in the fourth quarter of last year. Researcher Jung Ji-soo of Meritz Securities explained, “The record performance was due to steady increases in both affiliated and non-affiliated advertising volumes domestically and overseas,” adding, “The annual operating profit last year is expected to increase 22.2% year-on-year to 250.3 billion KRW.”

High-quality growth is expected to continue next year as well. Balanced growth is anticipated across all regions including domestic, Europe, North America, and China, with the agency’s scope steadily expanding in North America, particularly based on Samsung Electronics’ success in digital marketing. North America’s gross profit grew 35.5% and 41.6% in 2020 and 2021 respectively, and is forecasted to rise 24.1% this year.

Accordingly, Meritz Securities maintained a “Buy” rating and a target price of 33,000 KRW for Cheil Worldwide. The closing price on the previous day was 23,050 KRW. Researcher Jung said, “The current stock price is clearly an attractive level,” and “We maintain it as our top pick in the media sector.”