DB Securities on the 23rd said Cheil Worldwide has recently applied artificial intelligence (AI) to the ad production process and is managing it efficiently, and noted the high-dividend appeal remains intact. It maintained a "Buy" rating and a target price of 26,000 won. Cheil Worldwide's previous closing price was 18,650 won.
Cheil Worldwide has been managing more efficiently by applying AI to the ad production process. Representative solutions include CopyJoe, which automatically generates ad copy; ImageJoe, which visualizes artwork; ContiJoe, which automatically designs draft storyboards; and FilmJoe, which automates everything from generating video cuts to editing by combining text and images.
Shin Eun-jung, an analyst at DB Securities, said, "By allocating input expense or personnel efficiently through AI solutions, long-term SG&A savings are expected," and added, "Enterprise solutions are also being sold to corporations, and business-to-business (B2B) revenue appears to be expanding."
Accordingly, it projected that results will be defended in the second quarter this year despite a tough environment. DB Securities forecast Cheil Worldwide's gross profit at 494.9 billion won for the second quarter, up 2.3% from a year earlier. Operating profit was seen at 94 billion won, up 2%.
Shin said, "Although domestic and overseas marketing by key captive clients has been reduced throughout the first half, we expect the growth in sales to continue by expanding agency work mainly in emerging markets and securing non-affiliate and new advertisers at home."
She added that China will likely be sluggish due to the impact of branch closures, but the European subsidiary Iris appears to be narrowing losses.
It also viewed the dividend appeal as intact. Shin said, "Due to recognition of large one-off expense in the first quarter this year, full-year operating profit may slightly undershoot last year's level, but with a low base for net profit last year, there should be no issue for dividends," projecting this year's dividend per share (DPS) at 1,320 won.
Reflecting this, the expected dividend yield based on the recent share price was projected in the 7% range on a year-end dividend basis. Shin said, "From a long-term perspective, the high-dividend appeal remains intact."