[Click eStock] CJ CGV, Now Popcorn Is Also Available "Earnings Expectations"

[Asia Economy Reporter Lee Seon-ae] Daishin Securities announced on the 16th that it maintains a buy rating and a target price of 36,000 KRW for CJ CGV. This is based on the judgment that earnings will rapidly recover starting in May.

The nationwide audience in the first quarter was 12 million, a 44% increase compared to the previous year. The box office (BO) was 1.1 trillion KRW, up 52%. As of the 11th, the audience count was 20 million (66% increase), and BO was 200 billion KRW (78% increase). Since the allowance of eating and drinking inside theaters on the 25th of last month, the number of viewers has been rapidly increasing. From April 25th to the 11th, nationwide audience increased by 214%, and BO increased by 256%. This is interpreted as the effect of the release of Doctor Strange 2 and the popcorn effect. In the first quarter, CGV SPP (popcorn sales per person) was 1,700 KRW (12% increase), but after popcorn was allowed, it is currently recording around 3,200 to 3,500 KRW in May.

Researcher Kim Hoe-jae of Daishin Securities noted, "Korea is rapidly normalizing as the last restriction on theater operations, the ban on eating and drinking inside theaters, has been lifted. China is still affected by lockdowns, but the 2021 BO has already recovered to 74% of 2019 levels, and Turkey is achieving record-high performance." He added, "In May, domestic theaters are expected to reach break-even point (BEP), and from the third quarter, both consolidated and separate entities are expected to be profitable."

The absorption of CJ OliveNetworks' advertising division is also positive for earnings and stock price. This division handles OOH (out-of-home advertising), DX (Digital Experience) business, advertising on CGV's screens and IDs executed by advertisers, and advertising agency services for CJ Group affiliates. The profit contribution of this division is estimated to be about 20 billion KRW annually.