[Click eStock] "Studio Dragon Secures Content Competitiveness... Target Price Up 8%"

Shinyoung Securities Report

[Asia Economy Reporter Minji Lee] Shin Young Securities maintained a buy rating on Studio Dragon on the 27th, stating that the business attractiveness of content producers is increasing due to the diversification of online video services (OTT). They also raised the target price by 8.7% from the previous level to 125,000 KRW.

In the fourth quarter of last year, Studio Dragon is estimated to have recorded sales of 127.3 billion KRW, a 30.6% increase compared to the same period last year. Operating profit is estimated to have turned positive to 9.4 billion KRW.

Programming sales in the fourth quarter of last year are expected to decrease by about 19% compared to the same period last year. This is because the number of production episodes reflected decreased by about 23% compared to the same period last year. This year, the number of works is expected to increase compared to last year, mainly for external sales (Non-Captive) channels. Currently, nine works are under discussion, including three domestic external sales, three Chinese OTT, and three Netflix productions. The total number of works last year was 29.

Sales revenue is expected to reach 78.7 billion KRW, an 84% increase compared to the same period last year. This figure takes into account the sales reflected from the Netflix original Sweet Home in the fourth quarter. Shin Su-yeon, a researcher at Shin Young Securities, said, “Sweet Home consists of a total of 10 episodes, assuming a production cost of 2.5 billion KRW per episode,” adding, “To enhance the completeness of the work, more costs related to CG work are reflected, and profitability is expected to fall short of initial expectations.”

Studio Dragon holds a competitive advantage as the number one content producer in Korea. Considering its solid library of classic works and overwhelming production capacity to plan and produce about 100 works annually, it is expected to deliver attractive performance in the future.

In the long term, growth is expected through local drama production after establishing a U.S. corporation. Currently, the company is working on several projects to become a global production company, including not only production with the production company Skydance but also IP remakes and co-productions.

The company’s commitment to cost reduction is also positive. Researcher Shin Su-yeon said, “Based on 11 years of drama production experience, the company has expressed a commitment to cost reduction through the efficiency of the production system,” adding, “If the trend of improving profitability per work continues due to the diversification of OTT platforms, the company’s profitability improvement speed will accelerate.”

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