[Click eStock] "CJ ENM's Operating Profit This Year Expected to Be Lower Than Market Expectations... Target Price Down"

Target Price Downgraded from 80,000 Won to 70,000 Won

KB Securities has forecasted that CJ ENM's operating profit this year will be lower than market expectations and has lowered the target stock price from 80,000 won to 70,000 won. The investment rating remains at 'Buy.'

Choi Yong-hyun, a researcher at KB Securities, stated, "The downward revision of the target price is due to intensified competition in the online video service (OTT) sector and delays in the merger process, which led us to revise downward the 2025 profit and loss forecast for Tving, a key growth driver." He explained, "CJ ENM operates both content production and platform businesses and was expected to absorb the traditional media market, but the current market situation is challenging. Traditional media operators and domestic search businesses have all started collaborating with global OTTs, raising concerns about Tving's long-term growth potential." He added, "As a platform operator, we believe that increasing user engagement is a priority over immediate monetization."

CJ ENM's fourth-quarter results last year are expected to exceed market forecasts, but recognition of non-operating expenses seems inevitable. Researcher Choi analyzed, "CJ ENM's operating profit for Q4 last year is 70.9 billion won, slightly surpassing the consensus (average securities firm forecast), but large non-operating expenses are unavoidable. The operating profit beat consensus due to the delivery of three series from Fifth Season in the film and drama segment, deferred profit and loss recognition of 'Harbin,' and the success of musicals." Tving is expected to record an operating loss of 11.3 billion won due to a decline in average revenue per user (ARPU) and subscriber decrease, widening the deficit compared to the previous quarter. Non-operating expenses are expected to include asset revaluation, derivative losses, and goodwill impairment.

There is a forecast that this year's operating profit will fall short of market expectations. Researcher Choi predicted, "CJ ENM's operating profit this year is estimated at 227.3 billion won, a 69% increase compared to the same period last year but 5.5% lower than the consensus. The commerce and music sectors are expected to show solid performance, but Tving's pace of turning profitable is slow, and Fifth Season, whose earnings visibility is low, will continue to incur losses."

The merger of Tving and Wave is meaningful but requires additional strategies. Researcher Choi noted, "Excluding SBS, the TV channel market share held by stakeholders of Tving and Wave exceeds 30%, so the merger effect remains significant." However, he pointed out, "The market targeted by the merged entity in the long term will likely be traditional media rather than global OTTs, but so far, cord-cutting (cancellation of paid broadcasting) in the Korean media market has been very slow, so additional growth strategies are needed after the merger."