[Click eStock] "NCSoft Reflects Earnings and Game Operation Headwinds... Target Price Down 16%"

SK Securities Report

[Asia Economy Reporter Minji Lee] On the 30th, SK Securities lowered the target price for NCSoft by 16% from the previous level to 1,050,000 KRW, considering sluggish sales and declining loyalty among core users. The investment opinion was maintained as a buy.

First-quarter sales and operating profit are estimated at 524.6 billion KRW and 110.6 billion KRW, respectively, down 28% and 54% year-on-year, significantly below market expectations. Jinman Lee, a researcher at SK Securities, explained, "This is due to the underwhelming initial performance of Lineage2M, which was simultaneously released in Taiwan and Japan on the 24th, and the delay in the release of TricksterM, originally scheduled for the 26th." He added, "From a cost perspective, the annual labor costs are expected to increase by about 70 billion KRW compared to previous estimates due to special incentives (8 million KRW) paid to all headquarters staff in the first quarter and wage increases."

Accordingly, SK Securities revised downward its sales and operating profit forecasts for this year by 15% and 30%, respectively, to 2.75 trillion KRW and 951.6 billion KRW.

Investor sentiment is expected to be negatively affected due to inadequate responses to LineageM customers. On January 27, the company updated the Munyang system, one of the main monetization elements of LineageM, by adding a mid-save function. However, due to backlash from users who had completed the Munyang system through high spending before the update, a rollback to the client version prior to the update was implemented on February 1. During this period, the response to users who spent money on the Munyang system was insufficient, leading to a spread of boycott movements.

Researcher Jinman Lee said, "Recently, user sentiment toward major game operators such as Nexon and Netmarble has worsened, increasing regulatory concerns. This is considered a factor that could affect user loyalty and short-term investment sentiment."

With multiple adverse factors occurring simultaneously ahead of the release of this year's most important new title, Blade & Soul 2, the company's burden is expected to increase further. The researcher stated, "A decline in user loyalty for the main IP is expected to lead to a drop in stock price," adding, "Whether the stock price recovers will depend on the performance of Blade & Soul 2 and TricksterM."

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