Wemade's 'Mir4' Big Hit... Forecasting Record-Breaking Sales

Increased Sales Accompanied by Profitability Improvement... Turned Profitable
Q1 Mobile Segment Performance Soars 478%
Game Launch License Agreements in China and Taiwan
Won Copyright Lawsuit... Sufficient Investment Funds Available

China has issued a game license (panho) for the domestic game ‘Black Desert Mobile’. A panho is a permit required to provide game services within China. Since the THAAD (Terminal High Altitude Area Defense) incident in March 2017, China had not issued panhos for domestic games, but in December last year, it issued the third panho starting with Com2uS’s ‘Summoners War: Sky Arena’. The industry welcomes this move, as there is anticipation that China, boasting a market size of about 50 trillion won, is reopening. Asia Economy analyzed Pearl Abyss, the developer of ‘Black Desert’, and Wemade, which owns the popular Chinese intellectual property (IP) ‘Legend of Mir’.

[Asia Economy Reporter Lim Jeong-su] Wemade is riding a wave of success with its new game ‘Legend of Mir 4’ (hereafter Mir4). Thanks to Mir4’s success, the company recorded its highest quarterly performance ever in the first quarter of this year. It is expected that the trend of improving performance will accelerate as game releases and licensing contracts in overseas markets such as China and Taiwan gain momentum.

Mir4 Effect... Continuing Record-Breaking Performance

According to FN Guide, securities industry analysts’ consensus forecast for Wemade’s sales this year is 305.3 billion won. This would be the largest performance in Wemade’s history. The previous highest sales record was 227.4 billion won in 2013. Since then, sales had been somewhat sluggish, hovering around 100 to 130 billion won.

The sharp increase in sales is a result of the success of Wemade’s new release, Mir4. Wemade’s sales have significantly increased since the first quarter of this year due to Mir4’s popularity. In the first quarter, sales reached 76 billion won, a 147% increase compared to 30.8 billion won in the first quarter of last year, and a 63% improvement compared to 46.6 billion won in the fourth quarter of last year.

As sales increased, profitability also improved. Wemade turned profitable in both operating profit and net income in the first quarter of this year. Quarterly operating profit alone was 27.5 billion won. Reflecting this trend, the annual operating profit consensus for this year is 102.9 billion won, with an operating profit margin exceeding 30%. This marks a dramatic turnaround from the operating losses of around 10 to 30 billion won annually from 2018 through last year.

In particular, the improvement in the mobile game segment’s performance through Mir4 is overwhelming. Mobile segment sales in the first quarter reached 55 billion won, a remarkable 478% growth compared to the same period last year. During the same period, license sales increased by 2%, while PC online segment sales decreased by 13%.

Service Launch in China... Global Releases Including Taiwan

Wemade expects continued sales growth and profitability improvement in the second half of the year through game releases in China, Taiwan, and other markets.

In April this year, Wemade signed a contract with China’s Longhua Group for the PC client service of ‘Mir 2’ in China. Regardless of performance, Wemade will receive a minimum guarantee (MG) of 75 billion won over the next four years. This guarantees a minimum annual sales of 19 billion won.

Analyst Lee Jong-won of Sangsangin Securities said, "The Mir 2 PC client service contract is revenue with almost no expenses, so most of it will be recorded as profit," and added, "About 4 billion won per quarter will be reflected as profit."

Legend of Mir

Also, once the publisher for Mir4’s Chinese service is finalized in the second half of the year, Mir4 will be available in China after the end of the year. Additionally, Mir4 will be released in 11 languages across several Asian countries including Taiwan. In the second half, MirM will also be launched domestically.

Separately from operations, winning copyright lawsuits is expected to positively impact future performance. Wemade won the first trial against Chinese game company Kingnet and others for copyright infringement related to ‘Namwol Jeon-gi’. Last year, Wemade also won a lawsuit concerning Kingnet’s copyright infringement of Mir 2.

No Debt Policy with 70 Billion Won in Cash... Sufficient Investment Capacity

Wemade has maintained a long-term no-debt policy, establishing a solid financial position. At the end of the first quarter this year, Wemade’s borrowings were only 409 million won. Cash equivalents stood at 70.7 billion won, with net cash (excluding borrowings) exceeding 70 billion won.

Although equity, which once exceeded 400 billion won, decreased to 270 billion won due to consecutive net losses, the scale of equity has returned to an increasing trend since last year as profitability sharply improved.

An investment banking industry official said, "With a large cash reserve, Wemade has its own investment capacity and also has the ability to raise funds of 100 to 200 billion won or more," adding, "While having a stable financial structure, it is necessary to utilize surplus funds to expand investments for capital efficiency."

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