[Click eStock] "CJ ENM, Gradual Earnings Improvement Expected... Target Price Maintained at 80,000"

Concerns Over Decline in TVING Subscribers
Performance Improvement Expected in Advertising and Fifth Season Sectors
Content Competitiveness Anticipated to Strengthen if Merged with Wavve

NH Investment & Securities maintained a 'Buy' rating and a target price of 80,000 KRW for CJ ENM on the 15th. Despite concerns over a decline in TVING subscribers, the focus was placed more on the potential for gradual performance improvement going forward.

Lee Hwajeong, a researcher at NH Investment & Securities, stated, "The current stock price already reflects concerns related to the decline in TVING subscribers (a sharp drop in subscribers after the end of the professional baseball season and the possibility of SBS leaving the TVING-Wavve alliance). However, it is time to pay greater attention to the potential for gradual performance improvement in the advertising sector (integrated TV-TVING package sales) and Fifth Season (profitability-focused operations)."

According to NH Investment & Securities, after a significant decrease in TVING subscribers following the end of the professional baseball season last October, additional subscriber decline concerns have been raised due to the termination of the partnership with Naver in March. It is estimated that up to 30% of subscribers will be affected by the end of the partnership, but the opening of the professional baseball season on March 22 is expected to contribute to subscriber recovery. More than half of the Naver partnership subscribers are likely to convert to direct subscribers, which is expected to have a positive effect on ARPPU (average revenue per paying user) due to price increases and commission reductions.

Furthermore, although the possibility of SBS leaving the TVING-Wavve alliance has been highlighted following its partnership with Netflix, from TVING's perspective, a merger with Wavve can still be a positive factor. In the event of a merger, securing content from MBC and KBS would be possible, helping to maintain content competitiveness.

For the fourth quarter of 2024, CJ ENM's consolidated sales are expected to reach 1.3 trillion KRW, a 2% increase year-on-year, and operating profit is projected to grow by 20% to 70.2 billion KRW. In particular, Fifth Season is expected to record positive results for the first time in a while through a profitability-first strategy. A key factor is its stable operation during content production and monetization processes. In the advertising sector, the integrated package sales strategy for TV and TVING is expected to contribute to gradual revenue improvement. This is likely to maximize synergy between TV advertising and OTT advertising.

The researcher added, "Short-term concerns about CJ ENM have already been reflected in the stock price, and in the mid-to-long term, positive momentum such as subscriber recovery, content expansion, and advertising revenue improvement is expected to continue. In particular, the opening of the professional baseball season and the rise in ARPPU are anticipated to contribute to TVING's subscriber numbers and revenue growth."