[Click eStock] "CJ ENM Lowers Music Performance Forecast... Target Price Down 16%"

Q3 Earnings Likely to Miss Consensus
Music Segment Operating Profit Declines Due to KCON Weakness
Maintaining TVING Traffic in Q4 Is Key to Future Performance

DB Financial Investment on the 16th revised down the target price of CJ ENM by 16%, from the previous 107,000 KRW to 90,000 KRW, reflecting the recent decline in equity value and downward adjustment of music performance. The investment opinion 'Buy' was maintained. CJ ENM's closing price on the previous trading day was 63,900 KRW.

Shin Eun-jung, a researcher at DB Financial Investment, stated, "The recent sluggish stock price is believed to have already reflected concerns about TVING's performance after the autumn baseball season," adding, "Although it may take time, the core media business seems to be improving its performance centered on TVING and Fifth Season." He also said, "It is necessary to monitor the turnaround in the broadcasting industry and TVING traffic over the long term."

CJ ENM's third-quarter sales are expected to decrease by 2.6% year-on-year to 1.0825 trillion KRW. Operating profit is forecasted to increase by 512.4% to 45.3 billion KRW. However, this is due to a base effect and falls short of market expectations. Specifically, TVING is expected to see revenue growth and a reduction in losses, supported by existing subscriber fee increases and increased traffic from Korea Baseball Organization (KBO) autumn baseball. Operating profit is estimated to improve from -5 billion KRW to around the break-even point (BEP). However, amortization expenses related to Woo Ssi Wanghu are expected to exceed 10 billion KRW in August and September, which could act as a variable factor.

Fifth Season is expected to reduce losses by approximately 5 billion KRW compared to the second quarter by supplying one drama and one movie. In the music sector, although Zero Base One and MIAI's music tracks performed well, operating profit is projected to decrease by 18% year-on-year due to poor performance at KCON LA and Germany.

Researcher Shin said, "In the fourth quarter, whether TVING can maintain KBO traffic will be a key point to watch," adding, "TVING is expected to slightly increase its deficit compared to the third quarter by focusing investments on exclusive broadcasts of other sports and original entertainment during the fourth quarter." On the other hand, Fifth Season plans to supply more than four dramas in the fourth quarter. Considering that distribution rights available in the second half are concentrated, a surplus of over 20 billion KRW is expected in the fourth quarter. The music sector is also expected to see profit growth compared to the previous quarter, reflecting JO1 and INI albums, IZNA's debut, and Lim Young-woong's concert.