[Click eStock] "CJ CGV, Domestic Audience Drops 33%... Slump Continues"

Sales Plunge 25% Amid Sharp Drop in Domestic Audience Over the Past Year
Seeking Breakthrough in US 4DX... Differentiation Strategy Against OTT

CJ CGV is making efforts to improve its financials through workforce optimization and the new inclusion of a subsidiary under CJ OliveNetworks, but analysis suggests it continues to struggle due to the ongoing sluggishness in domestic movie attendance.

On the 14th, KB Securities lowered CJ CGV's target stock price by 18% to 5,000 KRW against this backdrop. The previous trading day's closing price was 4,455 KRW. The investment rating was also downgraded from 'Buy' to 'Hold' as the operating environment was judged to be challenging enough to reduce the estimated number of domestic viewers this year from 120 million to 105 million.

This year's performance is expected to be sales of 637.7 billion KRW and operating profit of 20.5 billion KRW. Although these figures represent increases of 62.3% and 352.6% respectively compared to the same period last year, they fall short by about 2% of the market consensus forecast of 697 billion KRW in sales and 21 billion KRW in operating profit.

In particular, domestic performance is expected to be notably weak. The number of domestic viewers in the first quarter is projected at 20.8 million, a 33% decrease from the same period last year, with sales expected to plunge 25% during the same period. It is forecasted that domestic standalone sales will be 134.9 billion KRW with an operating loss of 34.5 billion KRW. Meanwhile, the number of viewers in China is expected to increase by about 43% year-on-year, generating an operating profit of 21.3 billion KRW, which should help the overall performance.

Meanwhile, CJ CGV is seeking growth momentum through 4DX. Recently, it partnered with the US multiplex operator AMC to increase the number of special screening theaters from the existing 1,218 to 1,300. To differentiate from online video streaming services (OTT), the number of special screening theaters is being expanded, and the content scope is also broadening beyond movies to include sports and entertainment.

Choi Yong-hyun, a researcher at KB Securities, explained, "Currently, sales per screen are estimated at around 30 million KRW, but if the proportion of special screening theater attendance increases in the future, sales could grow. From a profitability perspective, since the main structure is a revenue-sharing (RS) contract, a leverage effect can be expected."