[Click eStock] "Webzen, Earnings Exceed Expectations and Future Outlook Is Bright"

Sales and Operating Profit Both Surge Over 100% Year-on-Year
Operating Margin Also Rises Thanks to Hit Self-Developed Game R2M

[Asia Economy Reporter Minwoo Lee] Webzen surpassed 100 billion KRW in sales in the third quarter of this year, exceeding market expectations. With upcoming launches of new titles in China, further growth is anticipated.

On the 9th, Yuanta Securities maintained a 'Buy' rating and a target price of 52,000 KRW for Webzen. The previous closing price was 34,000 KRW. Given the better-than-expected third-quarter performance and the upward momentum, the firm believes there is ample growth potential going forward.

Earlier, Webzen reported third-quarter sales of 107 billion KRW and operating profit of 43.5 billion KRW, representing increases of 126% and 134% respectively compared to the same period last year. Net profit also rose 121% to 34 billion KRW during the same period. These figures significantly exceeded market consensus estimates of 85 billion KRW in sales and 27.4 billion KRW in operating profit.

Sales from 'MU Archangel Archangel' were fully reflected in the quarter, with revenue related to the popular intellectual property (IP) 'MU' reaching 72.4 billion KRW, a 91% increase compared to the third quarter of last year. Another IP, 'R2', is also performing well. The release of R2M on August 25 drove R2-related sales to 26.7 billion KRW, a staggering 1419% increase year-over-year. Notably, since R2M is an in-house developed game, its operating profit margin surged from 27.3% in the previous quarter to 40.7% in the third quarter.

The outlook remains positive. In the fourth quarter, R2M’s full performance is expected to be reflected, leading to continued improvements in profit and profit margin. As of the 6th, R2M ranked 6th and 'MU Archangel' ranked 7th in overall app sales on Korea’s Google Play, indicating sustained strong performance and stable results.

Next year, new games using the MU IP are set to enter the Chinese market in earnest, promising new growth. 'Quanmin Qiji 22', to be serviced by Tencent, received its content distribution license (panhao) on July 1 and has undergone closed beta testing (CBT), with a release expected in early 2021. 'Yingyoda Tianshi', serviced by 37Games, also obtained its panhao on the 16th of last month and is currently accepting pre-registrations, with a possible release within the year. The already successful R2M and 'MU Archangel' will also be launched overseas, including Taiwan, in the first half of next year. Additionally, two more in-house developed games are in preparation.

Researcher Changyoung Lee of Yuanta Securities stated, "With continued domestic success and new game launches in China driving performance improvements, the profit structure is rapidly shifting from IP royalty-based revenue to a greater share of profits from in-house developed games," adding, "Both profit growth and valuation increases are expected."

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