[Click eStock] "Kakao Games Met 1Q Expectations... 2Q Success Depends on 'Odin' Popularity"

Overvaluation Already Reflected in Stock Price... Success of New Releases Like Odin to Determine Corporate Value Direction

[Asia Economy Reporter Minwoo Lee] In the first quarter of this year, Kakao Games delivered results that largely met market expectations. With new releases set to begin in earnest from the second quarter, the success of the highly anticipated title 'Odin: Valhalla Rising' is expected to determine the future direction of the company's performance.

On the 6th, Meritz Securities made this forecast regarding Kakao Games. Earlier, Kakao Games announced that it recorded consolidated sales of 130.1 billion KRW and operating profit of 15.6 billion KRW in the first quarter of this year. These figures represent increases of 34.9% and 22.8% respectively compared to the same period last year, largely aligning with market consensus estimates of 133.7 billion KRW in sales and 16.8 billion KRW in operating profit.

PC game sales reached 51.1 billion KRW, up 19.1% year-on-year. Although the North American and European services for 'Black Desert' ended at the end of February, the initial sales of 'Elyon' were reflected, resulting in solid performance. Mobile game sales were 51.1 billion KRW, increasing 40.5% during the same period. The effect of the 2020 release of 'Guardian Tales' has diminished, entering a stabilization phase. Other sales surged 76.6% to 18.9 billion KRW compared to the first quarter of last year, driven by increased demand for screen golf, which boosted Kakao VX's revenue. However, the operating profit margin fell by 1.2 percentage points to 12% year-on-year. Researcher Donghee Kim of Meritz Securities explained, "Although this year’s salary increases were reflected, marketing expenses were efficiently managed and reduced."

With a series of new releases lined up, attention is focused on performance improvements. Starting with 'Alice Closet' in March, the domestic release of 'Odin: Valhalla Rising' and the overseas release of 'Moonlight Sculptor' are scheduled for the second quarter. In the third quarter, 'Eternal Return: Black Survival' and 'World Flipper' are set to launch in overseas markets. In the fourth quarter, 'Elyon' will be released in North America and Europe, and 'Odin: Valhalla Rising' will launch in Taiwan.

The most anticipated title is 'Odin: Valhalla Rising.' It recorded 1.8 million pre-registrations within five days of opening. The strategy is to differentiate through a Nordic mythology setting, graphics led by Kim Beom, art director of 'Mabinogi,' and large-scale open-world warfare. Despite being released in Steam Early Access form in October last year, 'Eternal Return: Black Survival' has gained popularity with 50,000 simultaneous global users. It will be officially released through Kakao Games in the third quarter.

Researcher Kim said, "Kakao Games is trading at a market capitalization of 3.9 trillion KRW and a price-to-earnings ratio (PER) of 44 times as of the end of 2021, which is a 69% premium compared to the global gaming industry average of 26 times," adding, "The medium- to long-term performance growth and corporate value direction will be determined by the results of various anticipated titles from Odin to Eternal Return."

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