Samsung Securities analyzed on the 28th that Cheil Worldwide is increasing its advertising contracts domestically and internationally by securing new advertisers based on its competitive capabilities. It maintained a target stock price of 23,500 won and an investment opinion of 'buy.'
In the first quarter of this year, Cheil Worldwide's gross profit and operating profit recorded 433.5 billion won and 58.5 billion won, representing increases of 10.9% and 7.2%, respectively, compared to the previous year. In terms of gross profit, the headquarters increased by 13.4% and overseas subsidiaries by 10.3%, thanks to new advertiser development and the acquisition of a North American subsidiary.
Choi Min-ha, a researcher at Samsung Securities, said, "Despite ongoing external uncertainties in a challenging market environment, the volume of agency work increased due to the expansion of the digital business area."
Advertising volume (ATL) increased by 21%, contributing 15% to gross profit. Along with last year's low base effect, the performance consolidation of the North American subsidiary starting in the first quarter of this year and the growth of domestic outdoor advertising revenue influenced these results.
On the other hand, the pre-tax profit and net profit decreased compared to the previous year due to a total valuation loss (20 billion won) incurred by the metaverse content production company EVR Studio, which was invested in May 2022.
Samsung Securities observed that the advertising market continues a generally conservative marketing expense execution trend amid perceptions of lingering political and economic uncertainties domestically and abroad. Researcher Choi noted, "There are sectors continuing to invest in marketing, such as health supplements, healthcare, and beauty, but Cheil Worldwide is attracting new advertisers focused on growth industries," adding, "It's worth noting that the volume of non-affiliated advertising is significantly increasing as we expand our resources."
The North American region is expected to maintain stable growth this year through the expansion of digital agency areas and the strengthening of media agency foundations. Researcher Choi stated, "With inorganic growth resulting from mergers and acquisitions (M&A) and continued solid management policies, we will firmly establish a competitive advantage within the industry and continue to improve performance."