[Click eStock] Jaycontentree Resolves Earnings Uncertainty... Diverse Highlights This Year

[Asia Economy Reporter Myunghwan Lee] DB Financial Investment announced on the 17th that it has upgraded its investment opinion on J Contentree from neutral to buy, expecting the resolution of earnings uncertainty and an increase in the number of productions. The target price was also raised from the previous 66,000 KRW to 76,000 KRW.

DB Financial Investment forecasts that the company's consolidated sales for the first quarter of this year will increase by 49.6% year-on-year to 179.7 billion KRW. Operating profit is expected to turn to a loss, recording an operating loss of 4.8 billion KRW. The broadcasting division is expected to generate a profit of 7.5 billion KRW, reflecting captive scheduling of dramas such as "Gongjak City" and "Only One Person," as well as original margins from the web drama "All of Us Are Dead." The film division, which operates the multiplex "Megabox," is expected to record an operating loss of 12.3 billion KRW due to a sharp increase in COVID-19 cases despite the release of movies like Kingsman and Batman.

DB Financial Investment expects the number of productions by J Contentree to increase this year. The annual average number of productions, which was 15 in 2020-21, is expected to increase to 30-35 this year. Regarding this, Shin Eun-jung, a researcher at DB Financial Investment, analyzed, "This is the result of Studio LuluLala Joongang (formerly JTBC Studio) investing in shares of various content production companies, leading to Netflix and overseas local scheduling, as well as film production."

It is also positive that the scale of PPA (Purchase Price Allocation) amortization has been specifically presented, resolving uncertainty. DB Financial Investment analyzed that J Contentree provided a specific guideline on the scale of PPA amortization after the fourth quarter earnings announcement last year, somewhat alleviating earnings uncertainty. The estimated annual PPA scale is about 16 billion KRW. Reflecting this, the expected annual sales for this year are 819.3 billion KRW, a 14.2% increase year-on-year, and operating profit is expected to turn positive at 15 billion KRW.

Researcher Shin said, "After the fourth quarter earnings announcement last year, a specific guideline on the scale of PPA amortization was presented, somewhat alleviating earnings uncertainty," and added, "It is judged that the number and genres of productions in the broadcasting division are expanding compared to last year."