"Cheil Worldwide, Second-Half Growth Slowdown Inevitable... Target Price Lowered" [Click e-Stock]

On September 30, Heungkuk Securities stated that a slowdown in growth for Cheil Worldwide in the second half of the year is inevitable and lowered its target price from KRW 26,000 to KRW 23,000. The investment rating was maintained at 'Buy'.

Hwang Sungjin, research analyst at Heungkuk Securities, wrote in a report that “the second half of this year will likely mark a period where Cheil Worldwide’s growth momentum slows.” He added that “with continued emphasis on marketing efficiency by captive advertisers, top-line growth is dampened, and additional negative impacts on results are expected from the ongoing restructuring of the China business and the strengthening of the Korean won in the second half.”

For the third quarter on a consolidated basis, gross profit is estimated at KRW 453.5 billion, down 0.9% from the same period last year, while operating profit is expected to decrease by 14.3% to KRW 82.2 billion, falling short of market expectations. Hwang explained, “The challenging business environment is likely to persist in the fourth quarter, making it difficult to achieve the annual guidance.”

Regionally, growth in the North American market is decelerating, and in China, the company is seeking a transition to non-advertising businesses—such as concerts and intellectual property—due to the withdrawal of its electronics division in the first half of the year. Regarding the adoption of generative artificial intelligence (AI) solutions, Hwang commented, “While it is positive in terms of reducing production costs and improving efficiency, there is also an effect of lowering the overall marketing budget, so the key issue will be how effectively the reduced budget is reallocated to high-level marketing.”

Hwang also noted, “With a proactive shareholder return policy maintaining a payout ratio above 60%, concerns about a reduction in dividends per share (DPS) are limited,” and stated, “Expectations for the cancellation of treasury shares amounting to about 12% of outstanding shares and a high dividend yield will help support the stock price.”

This content was produced with the assistance of AI translation services.