[Inside the Stock] Pearl Abyss, a Beneficiary of License Acquisition, What Is the Future Stock Outlook?

[Asia Economy Reporter Minji Lee] Pearl Abyss's game Black Desert Mobile has obtained a Chinese game license, causing its stock price to fluctuate. Securities firms predict that if the game is launched in the fourth quarter of this year, significant performance improvements are expected even without the release of the new title (Red Desert).

License Issuance Boosts Target Price and Earnings Expectations

On the 1st, Pearl Abyss's stock price surged 20% over the past week, rising from 62,800 KRW to 75,700 KRW. The Chinese National Press and Publication Administration issued a game license for Black Desert Mobile, which Pearl Abyss owns, increasing expectations for future earnings growth. China issued foreign game licenses for 42 foreign games, including Black Desert Mobile, marking the first issuance in four months since February 9.

The issuance of the license is a key investment point because it can positively impact future earnings growth. Most of the company's revenue comes from the Black Desert intellectual property (IP). Until the online revenue from EVE Echoes, acquired through CCP Games in 2018, began, 100% of the revenue was generated from the Black Desert IP. Although revenue is now generated from the EVE IP, the Black Desert IP still accounted for 85% of revenue last year. If revenue from the Chinese market is reflected, the company's performance is expected to rise significantly.

The top-ranked mobile game in China generates daily revenue of 5 to 6 billion KRW, and even the 10th-ranked game earns around 2 billion KRW daily. Previously, Black Desert Mobile was a hit in popular Asian MMORPG (Massively Multiplayer Online Role-Playing Game) countries such as Korea, Japan, Taiwan, Hong Kong, and Macau, and has maintained top rankings among Chinese gamers for a long time. Considering that the publisher partner is China's largest publisher, it is highly likely to enter the top 5 in the Chinese mobile game revenue rankings shortly after launch.

The launch of Black Desert Mobile in China is expected as early as the fourth quarter of this year. Earlier, Pearl Abyss's subsidiary CCP Games received the Chinese license for EVE Echoes in February and is preparing to launch the game next month, about six months later. Seong Jong-hwa, a researcher at Ebest Investment & Securities, said, "The Chinese market publisher for Black Desert Mobile is highly confident in obtaining the license independently and has completed technical preparations and marketing efforts, including influencer recruitment, so the launch date is not far off." He added, "Assuming a mid-to-late December launch, the daily revenue in the fourth quarter could reach 3 billion KRW."

NH Investment & Securities also adjusted its forecast assuming a November launch of Black Desert Mobile, raising next year's revenue by 13% to 979.8 billion KRW and operating profit by 29% to 361 billion KRW. Researcher Ahn Jae-min of NH Investment & Securities stated, "We are revising upward the earnings estimates for the fourth quarter of this year and next year," and added, "We set a target stock price of 100,000 KRW, an 81% increase from the previous target."

However, as Black Desert Mobile's entry into China becomes more concrete, the launch schedules for Red Desert, Dokkaebi, and Plan 8 are expected to be delayed beyond initial plans. Red Desert is likely to launch in the first quarter of next year. Although it was expected to be released in the fourth quarter of this year, focus will shift to the launch of Red Desert after Black Desert Mobile's Chinese launch. It is expected to be released first on PC and consoles, followed by mobile. Ebest Investment & Securities analyzed that considering the schedule adjustment for Red Desert, Dokkaebi is expected to launch in the first quarter of 2023, and Plan 8 in the first quarter of 2024. Dokkaebi is a metaverse-type game based on excellent graphics and rendering technology. It is a metaverse game that combines reality and virtual reality, featuring fun elements beyond gaming in virtual spaces. Like Red Desert, it is expected to be released on PC and consoles first, then on mobile.

Rising Expectations for Chinese Performance... Where is the Next ‘Pearl Abyss’?

This license issuance is also expected to significantly improve investment sentiment toward the gaming industry. Domestic MMORPGs, which had been blocked from receiving licenses due to concerns such as violence, are now included on the list. This raises expectations that MMORPG games developed by domestic developers may receive additional licenses in the future.

Since December last year, five games from domestic companies have received licenses: Summoners War, EVE Echoes, Guardian Tales, Rooms: The Unsolvable Puzzle, and Black Desert Mobile. Among these, EVE Echoes and Guardian Tales were not entirely developed by domestic developers, and Summoners War had previously received a license. Rooms: The Unsolvable Puzzle is a casual genre game, not an MMORPG.

Other domestic companies expected to achieve results in China include NCSoft, Wemade, and Webzen. Among them, Wemade is expected to recover earnings quickly. Wemade owns the highly popular Chinese IP "Legend of Mir" and is currently selecting a publisher for the Chinese launch of its self-developed game "Mir4." NCSoft holds a strong IP lineup in China, including the Lineage series, Aion, and Blade & Soul, while Webzen owns the popular MU IP in China. Reflecting these expectations, Wemade's stock price rose about 7% in the past week, and Webzen's increased by approximately 4.7%.

Jung Ho-yoon, a researcher at Korea Investment & Securities, explained, "It has been difficult to create expectations for continuous license issuance for games that previously received licenses," adding, "With domestic MMORPGs now receiving licenses, this could lead to a valuation rerating for domestic game companies."

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