[Click eStock] "Cheil Worldwide Improves Performance with Increased Digital Business Share... Undervalued Phase"

[Asia Economy Reporter Kwon Jaehee] IBK Investment & Securities maintained its 'Buy' rating and target price of 37,000 KRW for Cheil Worldwide.

Cheil Worldwide's consolidated gross profit for Q3 this year is expected to be 381.8 billion KRW, and operating profit is forecasted at 84.8 billion KRW, representing increases of 17.2% and 20.8% respectively compared to the same period last year. This is also expected to exceed market consensus.

Researcher Lee Hwanwook of IBK Investment & Securities analyzed, "With the expansion of Samsung Electronics' agency scope and diversification of product categories, along with the continuous influx of new non-affiliated advertisers, performance improvement is expected to continue across all global regions, especially in the North American market."

Additionally, due to the increased proportion of digital business, the operating profit margin is expected to improve by 0.5 percentage points year-on-year to reach 8.7%.

Although some reduction in media agency volume in the second half is inevitable due to recession concerns, the expansion of digital agency areas centered on owned media is expected to continue improving overall company performance. Issues in the previously spotlighted new media advertising market have emerged, leading to an increase in advertising demand centered on owned channels that result in asset accumulation. As of Q1 this year, Cheil Worldwide's digital business proportion expanded to 52%. In particular, the increase in owned media performance within the digital business is a major factor, and demand in the related advertising market is expected to continue expanding. By region, North American gross profit is expected to grow sharply by 50.6% year-on-year. Other regions are also expected to record steady growth with Europe up 7.3%, China 15.6%, Southeast Asia 38.6%, South Asia 18.7%, Latin America 38.3%, and the Middle East 12.1%.

Researcher Lee stated, "Cheil Worldwide has demonstrated excellent digital response capabilities every quarter and is the largest comprehensive advertising agency in Korea expected to benefit from the expansion of advertisers' efficient marketing demand," adding, "The current stock price is in an undervalued phase, making it highly attractive for investment."