[Click eStock] "CJ ENM Shows Digital Transformation Competitiveness"

'Drunken City Women' Success Boosts 'TVING' Subscriber Growth
Kiwoom Securities Maintains CJ ENM Target Price at 215,000 Won

[Asia Economy Reporter Gong Byung-sun] CJ ENM is expected to post fourth-quarter results last year that fall short of market consensus. However, it is showing competitiveness in digital transformation through its online video service (OTT) TVING and commerce division OnStyle.

On the 18th, Kiwoom Securities estimated CJ ENM's fourth-quarter revenue last year at 948.9 billion KRW, a 0.5% increase from the same period last year, and operating profit at 89.5 billion KRW, a 1.7% increase over the same period. These figures are 4.8% and 4.7% below the respective consensus estimates.

The sluggish performance of the media division is interpreted as having impacted the results. The tentpole drama "Jirisan" underperformed expectations, and production costs increased with the resumption of OCN dramas. Additionally, the new COVID-19 Omicron variant affected the movie and musical sectors, and the commerce division did not see a significant peak season effect in home shopping, resulting in weak performance.

However, other divisions are expected to show strong results. The advertising division is likely to improve performance with the advertising peak season. Furthermore, TVING's subscriber acquisition progressed smoothly, supported by the success of "Sulkkun Doshi Yeoja-deul" (Drunk City Women). The music division's performance is expected to continue improving, reflecting album sales of JO1 and INI active in Japan, and Enhypen in Korea.

This year, digital transformation is anticipated to contribute to earnings. Namsoo Lee, a researcher at Kiwoom Securities, explained, "CJ ENM has quickly demonstrated competitiveness and success capabilities in digital transformation through TVING and OnStyle," adding, "They have a business structure that connects intellectual property (IP) acquisition and monetization by debuting artists across various genres using audition programs."

Going forward, CJ ENM is expected to establish growth momentum through partnerships with Viacom, acquisition of Endeavor Content, and strengthened cooperation with LINE. This signifies its transformation into a comprehensive content company. Additionally, it plans to further strengthen original series to sustain TV popularity and attempt to stabilize and expand TVING.

Accordingly, Kiwoom Securities maintained a "Buy" investment rating on CJ ENM with a target price of 215,000 KRW. The closing price on the previous day was 132,500 KRW.