[Click eStock] "CJ CGV, Slow Short-Term Stock Recovery... Target Price Down"

Target Price Downgraded from 12,577 Won to 7,000 Won

Yuanta Securities on the 23rd forecasted that the short-term stock price recovery of CJ CGV will be slow and downgraded the target price from the previous 12,577 KRW to 7,000 KRW. The investment opinion was maintained as 'Buy.'

Researcher Lee Hwan-wook of Yuanta Securities said, "Shareholder value dilution due to additional new share issuance is inevitable, so the short-term stock price recovery will be slow."

CJ CGV continued its performance improvement trend in the first quarter of this year. On a consolidated basis, first-quarter sales increased by 0.2% year-on-year to 392.9 billion KRW, and operating profit turned positive to 4.5 billion KRW. Lee analyzed, "It maintained an operating profit trend for four consecutive quarters," adding, "Performance improvement was recorded due to the recovery of audience numbers in major overseas countries such as Vietnam, Indonesia, and T?rkiye."

Domestically, the nationwide movie audience was about 30.91 million, recovering only 56% compared to the first quarter of 2019. However, due to the average ticket price (ATP) and per capita concession sales (SPP) rising by 16.4% and 60.9%, respectively, sales recovered 73.8% compared to the first quarter of 2019, recording 180.1 billion KRW. In Vietnam, local content 'MAI' and 'Pamyoo' were hits, achieving the highest-ever quarterly box office and operating profit with sales of 66.4 billion KRW and operating profit of 11.2 billion KRW. The number of viewers recovered 100% compared to the first quarter of 2019. Indonesia also showed a clear performance improvement trend with a 99% recovery in audience numbers compared to 2019, and T?rkiye saw a sharp profit improvement due to the restructuring of inefficient sites. However, 4D Plex experienced a decline due to the base effect of blockbuster content from the previous year, and China’s sales decreased by 8.1% year-on-year due to a temporary market share decline caused by the reduction of inefficient sites.

As the performance improvement trend continues, the long-term stock price outlook is positive. Researcher Lee said, "Quarterly performance improvement will continue throughout the year due to the expansion of blockbuster content releases," adding, "Based on a rich content lineup, the recovery of domestic and overseas audiences is expected to continue, and the effects of ATP and SPP increases as well as profit structure improvements will be fully reflected, making profit improvement clear." He added, "Once the capital conversion of CJ OliveNetworks is completed, the performance improvement trend is expected to accelerate further, with the annual profit scale estimated at around 50 billion KRW, and the debt ratio is expected to continuously decline, stabilizing the financial structure."