[Click eStock] "Cheil Worldwide Lowers Earnings Estimates Amid Uncertainty"…Target Price Down

[Asia Economy Reporter Lee Jung-yoon] Eugene Investment & Securities lowered the target price for Cheil Worldwide from 37,000 KRW to 32,000 KRW on the 1st, citing a downward revision of earnings estimates due to uncertain external conditions. However, the buy rating was maintained.

Cheil Worldwide's gross profit in the fourth quarter of last year increased by 12.7% year-on-year to 413 billion KRW, and operating profit rose by 10.5% to 71.8 billion KRW, falling short of the consensus estimate of 81.8 billion KRW.

Researcher Lee Hyun-ji of Eugene Investment & Securities explained, "Despite ongoing domestic and international uncertainties, it is positive that digital accounts for 53%, continuing digital-centered growth. However, operating profit margin was limited to 17.4% due to increased selling and administrative expenses from digital workforce recruitment and expense growth."

She added, "Headquarters' gross profit decreased by 4.8% year-on-year to 85.2 billion KRW, while overseas gross profit increased by 18.4% to 327.7 billion KRW. In particular, the headquarters experienced negative growth for the first time in four quarters due to a decrease in advertising volume from affiliated and non-affiliated advertisers amid the economic downturn," and "Overseas growth was led by major digital subsidiaries, with increases in digital and below-the-line (BTL) advertising volumes, resulting in growth from both affiliated and non-affiliated sectors."

Researcher Lee also stated, "Although it cannot be completely free from the impact of the economic downturn, the reason it can still defend itself is that overseas digital business is not centered on media or brand campaigns that are sensitive to the economy, but rather on performance marketing linked to advertisers' sales and a business structure focused on digital platforms," adding, "With continued cost control, the organization is being reorganized through collaboration processes between the corporation and subsidiaries for effective response, and profitability is expected to be defended by steady new advertiser development and expansion into various fields within digital."

Furthermore, the company’s active shareholder return policy, maintaining a 60% dividend payout ratio until next year, is also positively evaluated. Additional profit growth is expected if global mergers and acquisitions (M&A) become visible this year.