Meritz Securities on May 18 maintained its target price of 7,500 won and a "buy" rating for CJ CGV, citing the potential recovery of the South Korean film industry.
In a report, analyst Jeong Ji-soo noted that the government's distribution of 4.5 million movie tickets, combined with an increase in film productions, positions the Korean film industry on the brink of recovering to pre-COVID-19 levels.
Jeong pointed out that while audience attendance has shifted towards general screenings, leading to a decrease in average ticket prices and an increase in rental costs, the company still recorded an operating loss of 6.6 billion won. However, he highlighted that achieving profitability on a monthly basis in March is a positive sign.
For the first quarter of this year, CJ CGV reported consolidated revenue of 573.4 billion won, a 7.5% increase from the same period last year, with operating profit rising 172.4% to 8.7 billion won. Nevertheless, these figures fell short of market expectations.
Jeong stated that the combined revenue of its subsidiaries decreased by 1.8% year-on-year to 398 billion won, while operating profit dropped by 28% to 24.6 billion won. He explained that although all business divisions, including Turkey, 4D PLEX, and ONS, experienced steady growth, the revenue decline to 66.2 billion won—down 37% year-on-year—was largely due to the base effect from the blockbuster film "The Roundup 2," which had ranked fourth in the Chinese box office last year.
Looking ahead, Jeong projected that consolidated revenue and operating profit for 2026 would increase by 4.1% year-on-year to 2.3692 trillion won and 100.1 billion won, respectively. He noted that 4D PLEX is expected to resume growth in the second half of the year as it becomes capable of shipping major global contracts.
With anticipated domestic releases such as "The Roundup" and "HOPE" set to debut sequentially, and the allocation of a 450 million won budget for government movie ticket subsidies available from July to September, an increase in audience numbers is expected. Jeong added that alongside revenue growth, ongoing structural reforms for domestic and international sites are likely to improve profitability.
* This article has been translated by AI.
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