CJ ENM’s TVING and advertising set to rebound...Operating profit to return to the 200-billion-won range for the first time in six years

[Financial News]  Analysts expect CJ ENM to move beyond the slump in TV advertising and the burden of investing in over-the-top (OTT) services, and enter a phase of normalized earnings. The simultaneous return to profitability of TVING and U.S. content production company Fifth Season is seen as key to an earnings rebound next year.
On the 6th, Kim Hoe-jae, a researcher at Daishin Securities, maintained his “Buy” rating on CJ ENM and raised his target price by 20%, from 50,000 won to 60,000 won. He applied a price-to-earnings ratio (PER) of 21 to projected 2027 earnings per share (EPS) of 2,841 won.
CJ ENM posted revenue of 1.2 trillion won in the third quarter, down 4% from a year earlier, while operating profit rose 25% to 22.1 billion won. Analysts estimated that operating profit would have exceeded the previous estimate of 29.7 billion won excluding one-off compensation costs related to TVING.
Daishin Securities said the key takeaway from the results was the possibility that TV advertising had passed its low point. Third-quarter TV advertising revenue held steady at 63.8 billion won compared with a year earlier. The decline had eased after revenue fell 58% from 150 billion won in the third quarter of 2022. Average ratings for major content this year also came in at 6.7%, above the long-term average of 5.7%. Daishin Securities forecast a 5% rebound in advertising revenue next year.
TVING posted an operating loss of 7.2 billion won in the third quarter, but was estimated to have remained profitable on a recurring basis excluding one-off costs. It is expected to swing from an operating loss of 31.3 billion won this year to an operating profit of 26.5 billion won next year.
Researcher Kim said, “Fifth Season, too, is expected to turn around from an operating loss of 27.9 billion won this year to a profit of 7 billion won next year,” and analyzed that “profitability will improve as it resumes supplying two to three TV series next year.”
Daishin Securities forecast CJ ENM’s operating profit to rise 81%, from 110 billion won this year to 200 billion won next year. This would mark its return to the 200-billion-won range in operating profit for the first time in six years.
Researcher Kim added, “Profit leverage effects are expected as TVING and Fifth Season improve their earnings,” and that “as the recovery in earnings gathers pace, the possibility of a revaluation of the company’s value is also gaining traction.” 


[email protected] Kim Gyeong-a Reporter