"An SK hynix employee's bonus would be bigger than this."
After CJ ENM (035760.KQ) posted an earnings shock with first-quarter operating profit of just 1.5 billion won ($1.1 million), one brokerage issued a draft analysis report with that self-deprecating title. The title has since been revised to "Results Lower Than Already Lowered Expectations."
According to the securities industry on Thursday, CJ ENM recorded first-quarter revenue of 1.33 trillion won and operating profit of 1.5 billion won. The figures fell far short of the consensus estimate, amounting to an earnings shock.
TV advertising revenue fell 20.6%, pushing the media platform division to an operating loss of 21.2 billion won. The music division also posted an operating loss of 5.8 billion won, while streaming service Tving recorded a 19.2 billion won loss due to World Baseball Classic (WBC) broadcasting costs and the advertising off-season.
◇ "Quarterly Profit Less Than One hynix Employee's Bonus"… A Painful Comparison
Immediately after the earnings announcement, DB Financial Investment issued a report with the striking title, "An SK hynix employee's bonus would be bigger than this." The report drew a painful comparison with SK hynix (000660.KS), which recently achieved record-high earnings with per-employee bonuses expected to reach hundreds of millions of won, suggesting CJ ENM's quarterly profit may not even match a single hynix employee's bonus.
"There are many hurdles to overcome, including advertising and content costs. Given the negative advertising growth in the first quarter, the second-half ad market also looks challenging," said Shin Eun-jung, an analyst at DB Financial Investment. The brokerage lowered its target price for CJ ENM to 69,000 won.
◇ "Tving Is the Only Hope"… KBO Effect Holds Key to Rebound
Still, the securities industry is focusing on Tving's performance as a potential catalyst for a share price rebound. "Tving is the only hope now," said Lee Hyun-ji, an analyst at Eugene Investment & Securities, calling the streaming platform's performance the key variable for the stock's future trajectory.
Tving posted a 19.2 billion won operating loss in the first quarter due to WBC broadcasting rights costs and the advertising off-season, but there are signs of positive change, according to the analyst. She noted that a change in accounting standards — extending the content rights amortization period from two years to four years — is expected to generate cost savings of about 8 billion won per quarter.
"With broadcast advertising revenue declining for the fourth straight year, the rapid growth of digital advertising must fill the gap," Lee said. "From the second quarter, as the KBO professional baseball season begins in earnest, subscribers and traffic are increasing. If the KBO opening effect and expected original titles create synergy, reaching breakeven (BEP) in the second quarter is possible." Eugene Investment & Securities lowered its target price to 70,000 won from 80,000 won.
◇ "All or Nothing Earnings"… Seeking a Turnaround at Record Lows
NH Investment & Securities also cut its target price for CJ ENM by 28% to 65,000 won. Lee Hwa-jung, an analyst at NH Investment & Securities, described CJ ENM's current situation as a high-volatility phase where earnings are all or nothing. She noted that initial infrastructure investment costs related to Mnet Plus rose much more than expected, worsening profitability in the music division.
"Digital growth is still not enough to fully offset the slump in broadcast advertising," Lee said.
However, she also pointed to positive factors. The potential for IP monetization through Mnet Plus, which has secured 44 million subscribers, is growing, and Tving is maintaining advertising revenue growth based on the success of exclusive content.
"The current share price has already largely reflected fears about earnings instability," she said. "Once the company emerges from the painful tunnel of early-stage investment, meaningful profit contributions will begin."
CJ ENM shares are currently trading around 50,000 won, near their 52-week low. Annual earnings forecasts have also been sharply lowered to revenue of 578.8 billion to 601.8 billion won and operating profit of 11.6 billion to 13.8 billion won.
