Highest-ever Quarterly OP at W72.1bn
The author is an analyst of NH Investment & Securities. She can be reached at hzl.lee@nhqv.com. -- Ed.
2Q21 review: Solid earnings growth across regions and segments
- We maintain a Buy rating and TP of W31,000 on Cheil Worldwide. Despite ongoing uncertainties regarding Covid-19, advertisers both at home and abroad are notching up their ad spending amid growing fatigue from the prolonged pandemic situation. In 1H21, Cheil Worldwide’s captive business expanded in the areas of: 1) brand advertising (home appliances); and 2) ‘Biz-Connected Agency’ (North America, Southeast Asia), while its non-captive segment: 1) procured new digital advertisers; and 2) expanded the scope of its existing agency business, altogether achieving net growth across all regions. Believing that this positive direction will continue through 2H21, we favorably view the company’s high DPR (~60%) and the likelihood of an M&A deal by end-2021. Drawing attention to its stable earnings growth and attractive dividend policy, we maintain Cheil Worldwide as our sector top pick.
- Cheil Worldwide’s 2Q21 results show its highest-ever quarterly OP, with the firm booking consolidated GP of W316bn (+20% y-y) and OP of W72.1bn (+34% y-y), with OP topping consensus.
- HQ: HQ showed even top-line growth across all of its business segments, supported by both new product launches at captive advertisers and expanded agency business for non-captive financial sector advertisers. We expect these trends to continue into 3Q21.
- Overseas: Led by its digital ad business, Cheil Worldwide’s overseas domain registered net sales growth across all regions. In 1H21, digital ad sales comprised 57% of the firm’s overall overseas sales. By region, growth was noticeable in North America, especially in the company’s ‘Biz-Connected Agency’ for captive advertisers and its social campaigns for non-captive clients. This positive trajectory is to sustain in 3Q21.