[Click eStock] Studio Dragon on the Rise with Increased Content Production Capability and Pricing

Smooth Progress in Securing Webtoon IP... Growth Potential↑

[Asia Economy Reporter Minwoo Lee] Studio Dragon posted earnings in the first quarter that far exceeded market expectations (consensus). It is analyzed that the increase in individual selling prices, driven by enhanced content procurement negotiation power on the global stage, contributed to the strong performance.

On the 7th, Yuanta Securities maintained its 'Buy' rating and target price of 121,000 KRW for Studio Dragon, citing these factors. The closing price on the previous day was 103,200 KRW.

In the first quarter of this year, Studio Dragon recorded consolidated sales of 117.1 billion KRW and operating profit of 17.9 billion KRW. While sales decreased by 3% compared to the same period last year, operating profit increased by 54%. The operating profit exceeded the consensus by more than 20%.

The number of dramas produced increased by nearly 20%, from 92 episodes in the first quarter of last year to 109 episodes this year. This was influenced by the increase in digital platform productions, such as Netflix and TVING Originals, from zero to 16 episodes.

Overall production cost efficiency was also improved. The production costs recognized as expenses in the current quarter decreased by 16% year-on-year to 52 billion KRW. Amortization of intangible assets also decreased by 6% to 24.1 billion KRW. Additionally, through high-quality content such as 'Mr. Queen', 'True Beauty', and 'Vincenzo', the average selling price (ASP) of new works increased by 34% compared to the previous year. Researcher Seongho Park of Yuanta Securities explained, "Despite lower average production costs, the recovery rate of production costs increased, resulting in improved profits."

Based on these factors, Yuanta Securities raised its operating profit forecast for Studio Dragon this year from 62.9 billion KRW to 64.5 billion KRW. The relatively small upward revision is due to a decrease of 3.1 drama productions in the second quarter compared to the same period last year and the postponement of the airing of the highly anticipated blockbuster 'Island' to next year.

Researcher Park stated, "Although the quantity of works is somewhat disappointing, the margins of simultaneous broadcasts on iQIYI, such as 'My Roommate Is a Gumiho' airing from this month, are high, and the margins of TVING original works are expected to be higher compared to TV platforms, so achieving an annual operating profit in the 60 billion KRW range is fully attainable."

The decrease in drama production for TV platforms is analyzed to be due to CJ ENM expanding its investment in TVING and continuing a cost-efficiency policy for TV content. Researcher Park emphasized, "Studio Dragon is preparing more than 18 works currently in overseas planning and development, and among these, 1 to 2 works are expected to reach scheduling agreements with overseas platforms within this year. With equity swaps with Naver and business cooperation contracts with YLAB, Studio Dragon can secure a large number of premium intellectual properties (IPs) based on webtoons, giving it unique potential in overseas business."

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