[Click eStock] "CJ ENM Likely to Show Weak Q3 Performance... Profit Improvement Trend Maintained"

Increase in TVING Subscribers Amid Advertising Market Slump
Music Sector Sees Strong Album Sales Despite KCON Profitability Challenges
Uncertainty Remains Due to LiveCity Contract Termination

Meritz Securities forecasted on the 4th that CJ ENM's third-quarter earnings would be weaker than expected, but analyzed that the profit improvement trend would be maintained. The investment opinion 'Buy' and the target stock price of 105,000 KRW were maintained. CJ ENM's closing price on the previous trading day was 69,000 KRW.

Researcher Jeong Jisoo of Meritz Securities said, "CJ ENM's consolidated sales for the third quarter are expected to reach 1.2247 trillion KRW, a 10.2% increase compared to the same period last year," adding, "However, operating profit is expected to be 42.6 billion KRW, which is a 474.6% increase year-on-year but is likely to fall short of the market consensus of 56.1 billion KRW."

CJ ENM operates four major business sectors: 'Media Platform,' 'Film and Drama,' 'Music,' and 'Commerce.' Despite sluggish advertising conditions in the media platform sector, sales are expected to reach 344.3 billion KRW (+9.6%) due to an increase in subscribers to Tving's advertising subscription plan, with operating profit projected at 17.8 billion KRW (+841.0%).

In the film and drama sector, although the cumulative audience for 'Veteran 2' surpassed 6.41 million, sales are expected to be 374 billion KRW (+14.6%) due to a shortage of content supply from Fifth Season, resulting in an operating loss of -9.1 billion KRW.

The music sector is expected to record sales of 171 billion KRW (+0.6%) and operating profit of 13.3 billion KRW (-14.2%) despite album sales of 'Zero Base One,' 'ME:I,' and the success of the Asia tour, due to poor profitability of KCON in Germany. The commerce sector is expected to achieve operating profit of 17.9 billion KRW (+153.1%) influenced by the seasonal off-peak period.

For 2024, consolidated sales are expected to reach 5.007 trillion KRW (+14.6%), and operating profit is projected to turn positive at 166 billion KRW. In particular, the media platform sector anticipates Tving's paid subscribers to reach 4.96 million, which is considered sufficient for Tving's standalone business to break even. In the film and drama sector, since most of the works supplied by Fifth Season are scheduled for the fourth quarter, an operating profit turnaround is expected for the first time in two years. The music sector also expects profitability recovery compared to the same period last year, with album releases and a Japan arena concert planned for the fourth quarter.

Researcher Jeong said, "However, the timing and scale of the approximately 300 billion KRW non-operating loss due to the termination of the Live City contract remain uncertain and could affect future earnings," adding, "Despite these uncertainties, we believe that related concerns have already been reflected in the stock price."