[Click eStock] "YG, Big Bang Comeback in Sight... Operating Profit of 40 Billion Won Possible"

Restructuring Loss-Making Businesses Including YG Food... Blackpink's Popularity Also a Boon

[Asia Economy Reporter Minwoo Lee] With the confirmed comeback and contract renewal of Big Bang, an improvement in YG Entertainment's performance is anticipated. Analysts suggest that if loss-making divisions such as YG Food are also withdrawn, operating profits could reach the 40 billion KRW range next year.

On the 7th, Yuanta Securities forecasted that YG Entertainment would record sales of 341.2 billion KRW and operating profit of 18.8 billion KRW this year. This marks a significant improvement from last year's estimates of 285.4 billion KRW in sales and an operating loss of 5.9 billion KRW. This is because the return of the idol group Big Bang, a major factor in normalizing performance, has become visible.

In fact, Big Bang has decided to perform at the 'Coachella Valley Music & Arts Festival' scheduled from April 10 to 19. Seongho Park, a researcher at Yuanta Securities, explained, "Currently, Big Bang's contract renewal is understood to be in the final stages of agreement on detailed items such as contract period and revenue sharing ratio," adding, "With the decision to appear at Coachella Festival, doubts about the contract renewal between YG Entertainment and Big Bang will disappear."

Since Big Bang was the golden goose laying golden eggs for YG Entertainment, it is expected that substantial performance improvements will follow. Previously, YG Entertainment recorded a consolidated operating profit of 25.2 billion KRW in 2017, the year before Big Bang's military service. It is estimated that operating profit from Big Bang alone approached 20 billion KRW at that time. Big Bang's domestic album sales (including group, unit, and solo) amount to 210,000 copies, accounting for 32% of total company sales. The global concert attendance is also 2.01 million, about 78% of the total, and their concert guarantees are top-tier.

The 'Big Bang effect' is expected to be fully reflected in YG Entertainment's 2021 performance. Researcher Park stated, "If activities officially resume starting with the Coachella Festival, global tours will restart from the second half of this year," and "Assuming a year-end Japan tour, related performance will be fully reflected from 2021."

Accordingly, YG Entertainment is expected to achieve operating profits in the 40 billion KRW range in 2021, the highest level ever. Simply discontinuing the broadcasting production division, which had annual losses of 7 to 8 billion KRW, and deciding to close and sell YG Foods stores, which had annual losses of 2 to 3 billion KRW, is expected to improve performance by about 9 to 11 billion KRW. The popularity of the idol group 'BLACKPINK' is also a positive factor. They have recently proven their concert ticket power with sold-out dome tours in Japan and ranked second in global YouTube views in 2019, indicating strong overseas market interest.

Yuanta Securities gave YG Entertainment a 'Buy' investment rating with a target price of 43,000 KRW. The closing price on the 6th was 30,000 KRW.

This content was produced with the assistance of AI translation services.