[Click eStock] "SM, Earnings Growth Not Easy This Year"... Target Price Lowered

Hana Financial Investment Issues 'Buy' Rating and 34,000 KRW Target Price... Closing Price on 11th at 26,100 KRW

Source: SM

[Asia Economy Reporter Kum Boryeong] SM Entertainment is facing a situation where profit growth is not easy due to the impact of its subsidiaries and the novel coronavirus (COVID-19), according to an analysis.

On the 12th, Hana Financial Investment gave SM a 'Buy' rating but lowered the target price from the previous 39,000 KRW to 34,000 KRW. The closing price on the 11th was 26,100 KRW.

Lee Kihoon, a researcher at Hana Financial Investment, said, "The deficit of other subsidiaries is larger than expected, and assuming the cancellation of the 250,000-person dome tour scheduled for the end of April conservatively, we lowered the profit estimates and consequently the target price." He added, "Entry has already been banned in more than 100 countries, and Japan, which has a high proportion of overseas profits, has effectively blocked mutual air routes at least until the end of this month. The COVID-19 issues in Japan and other countries (Southeast Asia, North America, etc.) besides Korea must be resolved simultaneously."

The situation of the subsidiaries is also unfavorable. In the fourth quarter of last year, SM recorded sales of 193.9 billion KRW and operating profit of 13.8 billion KRW, down 7% and 9% respectively compared to the previous year. The researcher emphasized, "The three major other subsidiaries, Beijing, Everysing, and F&B, are all affected by COVID-19. With EXO's military enlistment cycle making a separate division's poor performance inevitable until 2021, if the five scheduled Tokyo Dome tours next month are also canceled, annual profit growth will be difficult."

The researcher believes that buying is necessary after mid-next month. He analyzed, "If the Japan Olympics are not canceled, activities will resume by May or June at the latest, and President Xi Jinping's visit to Korea is still expected within the first half of the year. Since a rookie girl group is scheduled to debut within the first half, it is necessary to consider an active buying perspective again after mid-April, following a period of adjustment."

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