Cheil Worldwide steps up shareholder returns despite weak results; target price: 23,000 won

[Financial News] Eugene Investment & Securities maintained its “Buy” rating and target price of 23,000 won for Cheil Worldwide, saying that although the company reported weak results as major advertisers cut marketing spending, its proactive shareholder-return policy was positive.
In a report on the 2nd, Eugene Investment & Securities analyst Lee Hyun-ji said that the difficult business environment was expected to persist next year as affiliates’ controls on advertising budgets continued for an extended period. However, she noted that the company was showing a strong commitment to shareholder returns, including by considering share buybacks and cancellations, as well as whether to maintain dividends.
Cheil Worldwide recorded revenue of 1.039 trillion won and operating profit of 77 billion won in the third quarter of this year. Operating profit fell 19.7% from the same period a year earlier, coming in 5.9% below market estimates. Gross profit declined 6.4% to 428.1 billion won. The results reflected intensified efforts to optimize marketing budgets as major advertisers faced rising cost pressures, as well as the impact of business restructuring at some overseas offices. Gross profit at headquarters fell 3.2% to 97.8 billion won.
Overseas gross profit fell 7.3% to 330.3 billion won, marking its first contraction since 2020. North America and Latin America (LATAM) grew 0.1% and 7.6%, respectively, while Europe and China declined 7.0% and 16.5%. Gross profit also fell in Southwest Asia, Southeast Asia and the Middle East. Gross profit from affiliates declined 10% from a year earlier, while gross profit from non-affiliated advertisers grew by just 1%.
Eugene Investment & Securities expected revenue and profitability to weaken in the fourth quarter as major advertisers continued to cut costs, particularly affecting work from affiliates. It forecast this year’s revenue and operating profit at 4.263 trillion won and 279 billion won, respectively, down 6.3% and 17.3% from the previous year.
Operating profit next year was estimated to rise 1.6% to 283 billion won. Cheil Worldwide is shifting its business portfolio toward direct-to-consumer (D2C) by strengthening its digital marketing, offline experiential marketing and retail marketing capabilities. With the company also considering medium- to large-scale mergers and acquisitions (M&A), alongside streamlining its overseas workforce, growth centered on non-affiliated advertisers is expected to continue.
The shareholder-return policy was also cited as a factor supporting the company’s investment appeal. On September 30, Cheil Worldwide announced plans to buy back and cancel shares worth a total of 140 billion won over the following year. On the 15th of last month, it canceled all of its existing treasury shares, which accounted for 12%. The company plans to carry out new share buybacks and cancellations worth 40 billion won this year and 100 billion won next year.
Lee said the company was considering ways to keep its dividend as close as possible to the previous year’s level even if its full-year results declined, adding that its proactive shareholder-return policy was positive despite the weak business environment.

[email protected] Lee Jeong-hwa Reporter