[Click eStock] "As Expected, BTS"... Big Hit Posts Strong 3Q Earnings

Operating Profit 40.1 Billion KRW... 73% Increase YoY
Strong Performance Expected in BTS Comeback Q4... "Online and Offline Growth Possible"

On the 2nd, the group BTS delivered a special congratulatory message to mark the 3rd anniversary of UNICEF Korea Committee's 'LOVE MYSELF' campaign.
[Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] Big Hit Entertainment (hereafter Big Hit), the agency of popular idol group BTS, posted better-than-expected strong earnings for the third quarter of this year. Despite the COVID-19 pandemic, growth in various indirect sales drove the performance.

On the 17th, Ebest Investment & Securities maintained a 'Buy' rating on Big Hit and raised the target price by 17.9% to 250,000 KRW. The closing price the previous day was 171,500 KRW. The analysis suggests that expectations have risen as the stock price increased following earnings that exceeded market consensus.

Earlier, Big Hit reported preliminary consolidated earnings for the third quarter with sales of 190 billion KRW and operating profit of 40.1 billion KRW, representing increases of 54.0% and 73.0% respectively compared to the same period last year. Although offline events and concerts were absent due to COVID-19, growth in indirect sales such as merchandise (MD), licensing, and content appears to have driven the results. While the proportion of direct and indirect sales was similar in the first half of the year on a cumulative basis, indirect sales expanded to over 60% of total sales in the third quarter. Revenue deferral of 36 billion KRW from BTS’s online concert 'BangBangCon' held in June, paid online fan meetings by Seventeen (on August 30), and steady increases in fan club and intellectual property (IP) sales contributed to this growth. Album sales in the third quarter, including BTS’s 'Dynamite' digital single and Seventeen’s special mini-album released in September, are expected to be key performance momentum in the fourth quarter, as major artists’ comebacks are concentrated in the last quarter.

The conservative operating profit relative to the expansion in scale is attributed to increased selling and administrative expenses. Representative factors include labor costs, accounting recognition related to BTS stock gifts, and costs associated with relocating to the Yongsan headquarters. Selling and administrative expenses in the first half of this year were about 28% of sales, and third-quarter expenses are estimated to have increased compared to the first half on a cumulative basis.

Strong performance is expected to continue into the fourth quarter. Ebest Investment & Securities forecasts Big Hit to achieve sales of 375 billion KRW and operating profit of 53.9 billion KRW in the fourth quarter, representing increases of 91.2% and 66.3% respectively compared to the same period last year. Growth is expected across albums, MD/licensing, content, and performances. Analyst Jina Ahn of Ebest Investment & Securities explained, "We expect performance revenue of 55 billion KRW from Big Hit Label’s offline concert held in December and growth in album sales, MD, and licensing segments due to BTS’s comeback in the fourth quarter. While growth centered on online and digital content continues, simultaneous growth in direct sales such as albums and performances, along with related streaming and MD product sales as indirect sales, will enable substantial profit growth."

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