[E-Daily Reporter KIM YOON-JEONG ] DS Securities projected that CheilWorldwide(030000)’s third-quarter earnings this year will fall short of market expectations due to intensive efforts by its major affiliates to improve marketing cost efficiency. The firm lowered its earnings estimates and the price-to-earnings multiple applied to the advertising sector, reducing the target price by 4% from 26,000 won to 25,000 won. It maintained its “Buy” investment rating.

On the 1st, Jang Ji-hye, an analyst at DS Securities, projected that CheilWorldwide’s consolidated gross profit for the third quarter would decline 3% year-over-year to 444.9 billion won, while operating profit would fall 16% to 80.1 billion won. She estimated the operating profit-to-gross profit ratio (OP/GP) at 18%. Operating profit is expected to fall short of market expectations of 96.9 billion won.
Analyst Jang stated, “The weak performance is likely attributable to significant cuts in marketing expenses by affiliates and the reflection of investment costs in new businesses such as AI.” She noted that major affiliates have recently intensified efforts to optimize advertising budgets as the profitability of their Mobile Experience (MX) business units declined due to rising memory prices.
Despite new product launches, advertising and campaigns in TV and digital media have decreased; while direct-to-consumer (D2C) e-commerce and retail advertising are partially offsetting this, a decline in revenue is expected to be inevitable. Analyst Jang predicted, “With revenue shrinking, the decline in earnings will be even greater as existing personnel costs and investment expenses for new businesses, such as AI, are factored in.”
Investments for medium- to long-term growth are also continuing. Analyst Jang explained, “To sustain growth despite the trend of reduced marketing budgets at major affiliates, CheilWorldwide is preparing to develop AI solutions, expand its base of non-affiliated advertisers, and pursue mergers and acquisitions (M&A).”
The company is expected to strengthen its performance marketing capabilities through investments in digital and AI talent and to secure new advertising contracts by developing AI solutions, such as enterprise solutions. Although related investment costs have been a burden this year, they are expected to decrease by 2027. The company is expected to drive global earnings growth by expanding its base of non-affiliated advertisers, primarily through its North American and European subsidiaries, and by pursuing M&A using excess cash—excluding working capital—from its net cash holdings.
Despite the weak earnings, shareholder returns will increase. CheilWorldwide announced the previous day that it would repurchase and cancel 12% of its existing treasury stock, along with an additional 140 billion won worth of shares, in installments over the next year. The new purchase volume represents approximately 6% of the total number of issued shares based on the previous day’s closing price.
Analyst Jang commented, “Despite weak operating performance this year, the dividend per share (DPS) is expected to remain at 1,230 won, the same as last year, and the current stock price offers an attractive dividend yield of 6.5%.”
The target price revision downward reflects lower earnings estimates and a reduction in the average target multiple for the advertising sector from 12x to 10x. Analyst Jang noted, “There is significant room to raise the target price if earnings momentum increases in the future, such as through M&A.”