"Earnings Expectations Have Been Lowered"—Cheil Worldwide's Target Price Cut

[Financial News] On the 17th, Shinhan Investment & Securities lowered its target price for Cheil Worldwide from 24,000 won to 21,000 won, reducing its earnings expectations. It maintained its "Buy" rating.
Shinhan Investment & Securities analyst Ji In-hae noted, "The largest advertiser's aggressive drive to improve marketing efficiency is expected to continue through next year," adding, "The burden of investing in artificial intelligence (AI) is also increasing."
Shinhan Investment & Securities significantly lowered its earnings estimates for Cheil Worldwide. This year's gross profit is projected at 1.87 trillion won and profit at 282.8 billion won, down 2.2% and 14.7%, respectively, from the previous estimates. Next year's forecasts were also cut by 3.6% and 17.8%, respectively.
Analyst Ji said, "Gross profit is expected to remain at a similar level as the expansion of non-affiliate advertising volume offsets weakness and the direct-to-consumer (DTC) business continues to perform well." She added, "However, the environment has become less favorable for achieving the previous guidance of 5% gross profit growth and maintaining the previous year's operating margin of 18.1%."
She continued, "Despite new product launches, controls on captive budgets have begun in earnest, and the impact on third- and fourth-quarter earnings from the stronger Korean won is understood to have been significant." She added, "Next year, the company aims to return to gradual growth, driven by non-affiliate business, DTC, and the performance of business-to-business (B2B) AI solutions."
She also said, "Although the investment appeal has weakened as the growth story has become less compelling, we are maintaining our Buy rating." She added, "Even under the revised estimates, a price-to-earnings ratio (PER) of 10 times based on this year's expected earnings and a dividend yield of 6.5% should support the lower end of the share price."

[email protected] Seo Min-ji Reporter