[Special Stock] Contentsree Joongang Lowers Next Year's Earnings Outlook... Target Price Downward Adjustment

NH Investment & Securities on the 18th lowered the target price of Contentsree Joongang by 7%, from 14,000 KRW to 13,000 KRW, stating that it is expected to record an operating loss in the fourth quarter and fall short of market consensus. The closing price on the previous day was 9,510 KRW. The investment opinion was maintained as 'Buy.'

In a report released that day, Ewha Jeong, a researcher at NH Investment & Securities, explained, "Considering the temporary cost burden that may occur during the branch consolidation process in the space division, we raised the operating expense estimate for 2025, which led to a downward revision of earnings estimates. However, there is no change in the estimates for the broadcasting division."

NH Investment & Securities expected Contentsree Joongang's consolidated sales for the fourth quarter to increase by 0.4% year-on-year to 258.4 billion KRW, with an operating loss of 13.1 billion KRW, continuing the deficit and falling short of the market consensus (-8.6 billion KRW).

Researcher Ewha Jeong analyzed, "Despite the release of anticipated works such as ‘Joker 2’ and ‘Wicked,’ the box office was flat, and the poor performance of the space division due to renovations of indoor playground facilities had an impact. In the broadcasting division, although a slow performance flow is inevitable due to the temporary reduction of the Wednesday-Thursday slot, future additional sales can be expected thanks to the unexpected success of ‘Okssi Buinjeon.’"

Regarding the reason for maintaining the 'Buy' investment opinion, she explained, "It is because the company is a valid operator with balanced improvements in P, Q, and C, abundant blockbuster momentum (Good Boy, My Youth, Knock Off) that will bring earnings growth, and expectations for the resumption of exports to China."

First, regarding P, which refers to profitability, she pointed out that thanks to the renewal of the supply contract with Netflix (expected in Q2 2025), a meaningful improvement in the recoupment rate is expected for TV-Netflix simultaneous broadcasts.

Regarding sales volume (Q), she said, "The possibility of normalizing the captive (JTBC) weekday drama slot is valid." She forecasted that the total number of works aired for captive audiences in 2024 will be 10. If the Wednesday-Thursday drama scheduling is normalized (continuously without interruption), 13 dramas can be scheduled annually, and if Monday-Tuesday dramas resume, 16 dramas can be scheduled annually.

Regarding costs (C), she viewed positively the efficiency in production costs through hiring rookie actors in the content division, plans to reduce fixed costs due to branch consolidation in the space division, and the decreasing trend in amortization expenses following the completion of PPA amortization by production subsidiaries. The reduction in amortization expenses for 2025 was estimated at 7 billion KRW.