[Click eStock] "Studio Dragon, Content Awareness Rising... Q2 Profit Maximization Expected"

[Asia Economy Reporter Minji Lee] NH Investment & Securities maintained a buy rating and a target price of 110,000 KRW for Studio Dragon on the 8th. This decision was based on the first-quarter results meeting market expectations, along with the judgment that profit leverage will be maximized due to increased content recognition and strong overseas sales.

Studio Dragon's operating profit for the first quarter was 11.6 billion KRW, a 5% increase compared to the same period last year, and sales rose 8% to 120.3 billion KRW.

Researcher Hwajeong Lee of NH Investment & Securities stated, “Sales growth was particularly notable in sales revenue, which grew 19%. It appears that the company's increased content recognition led to higher sales prices.”

On the cost side, amortization of intangible assets remained stable. With binding contracts with Netflix, it is expected that 1 to 2 works will be simultaneously aired on Netflix each quarter, and amortization of intangible assets is anticipated to stay within the range of 25 to 27 billion KRW.

For the second quarter tentpole project, The King: Eternal Monarch, the Netflix recoupment rate (production cost support ratio) is estimated to be at least at the level of Mr. Sunshine (80%). The terrestrial broadcast scheduling also results in a high scheduling recoupment rate.

Researcher Hwajeong Lee forecasted, “As high growth in sales revenue continues in the second quarter and amortization of intangible assets stabilizes, profit leverage will fully materialize. With anticipated works such as It’s Okay to Not Be Okay and Secret Forest Season 2 scheduled for the second half, profit leverage is expected to continue.”

She added, “Due to COVID-19, global OTT companies are expected to face unstable content supply in the second half, so Studio Dragon’s ability to supply content steadily may enhance its negotiating power.”

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