[Click eStock] "1Q Earnings Shock Netmarble... Profit Rebound Expected in Second Half"

Q2 New Releases Show Effect but Operating Profit Decline Inevitable Due to Cost Issues
Full-scale Rebound Expected from Second Half of the Year

[Asia Economy Reporter Minwoo Lee] Netmarble posted sluggish results in the first quarter of this year. This was due to the absence of new releases and an overall decline in sales of major existing games. Although highly anticipated titles such as "Second Country" are set to launch in the second quarter, related marketing expenses and increased labor costs are expected to delay a performance rebound until the second half of the year.

On the 17th, Samsung Securities lowered Netmarble's target stock price by about 6.3% to 150,000 KRW based on this assessment. The closing price on the previous trading day was 127,500 KRW. The investment opinion was maintained as "Buy."

The main background is the weak performance in the first quarter. Netmarble recorded consolidated sales of 570.4 billion KRW and operating profit of 54.2 billion KRW in the first quarter of this year. Although these figures increased by 7.04% and 166.69% respectively compared to the same period last year, they fell significantly short of market expectations (consensus). Sales were down by 11.90%, and operating profit decreased by 37.60%. This is interpreted as a result of the combined effect of the absence of new releases and poor performance of existing titles. Samsung Securities analyst Donghwan Oh explained, "'Marvel Contest of Champions' saw a 26.9% decrease in sales compared to the previous quarter due to seasonal factors in the first quarter," adding, "'The Seven Deadly Sins' increased sales by 14.3% in the North American region but could not offset the overall sales decline."

Analysis suggests that a rebound in the second half depends on the success of the new release "Second Country." In the second quarter, sales growth from "Marvel Contest of Champions" and "The Seven Deadly Sins" in North America, along with new sales from "Second Country," scheduled for release on the 10th of next month, are expected to contribute to an overall sales rebound. However, increased marketing expenses and labor costs related to the new release make a decline in operating profit compared to the first quarter unavoidable. Analyst Oh forecasted, "The performance rebound in the second half depends on the success of new titles such as 'Second Country,' 'Seven Knights Revolution,' and 'Marvel Future Revolution,' which are scheduled for release in the second half."

Attention is focused on the potential success of "Second Country." Netmarble has not yet disclosed the number of pre-registrations for this game. However, given that it is developed using cartoon rendering technology based on globally renowned intellectual property (IP), its potential for success remains high. Analyst Oh predicted, "Considering the simultaneous release in Asian regions such as Japan, Korea, and Taiwan, 'Second Country' is expected to record an initial daily sales figure of 1.8 billion KRW, similar to 'Seven Knights 2.'"

He added, "Although adjustments to annual profit estimates are necessary, the upcoming release of the next title 'Second Country' is becoming visible, and with Kakao Bank's listing this year highlighting Netmarble's equity value, a short-term stock price increase is possible."

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