[Click eStock] "Webzen, Decline in Revenue of Existing Major Games"

Expectations on New Releases Momentum in Second Half
EBest Investment & Securities "Webzen Target Price Downgraded from 45,000 Won to 39,000 Won"

[Asia Economy Reporter Gong Byung-sun] Webzen's second-quarter earnings are expected to fall short of market consensus. However, the release of new titles in the domestic and Chinese markets in the second half of the year is anticipated to be a growth driver.

On the 22nd, Ebest Investment & Securities estimated Webzen's second-quarter sales to increase by 21.5% year-on-year to 73.2 billion KRW, and operating profit to rise by 93% to 31.7 billion KRW. These figures represent decreases of 4.6% and 11.4%, respectively, from previous forecasts. They are also expected to fall short of consensus, which stands at 77.9 billion KRW for sales and 37.1 billion KRW for operating profit. Ebest Investment & Securities’ earnings forecast is 6% and 14.6% below consensus for sales and operating profit, respectively.

The decline in sales from existing major games is interpreted as having impacted the earnings. Sales in the second quarter for games based on the intellectual property (IP) of Mu, R2, and Shot Online decreased by 5.2%, 13%, and 14.4%, respectively, compared to the previous quarter. Operating profit is estimated to have fallen by 15.1% quarter-on-quarter due to increased costs such as marketing expenses. Advertising expenses in the second quarter were 2.9 billion KRW, approximately four times higher than the previous quarter.

Accordingly, Ebest Investment & Securities maintained its 'Buy' rating on Webzen but lowered the target price from 45,000 KRW to 39,000 KRW. The closing price on the previous day was 29,800 KRW.

Ebest Investment & Securities analyzed that expectations should be placed on new title momentum in the second half of the year. The momentum from China-related new titles such as Yingyodaechunsa and Jeonmin Gijeok 2, released in the first half, has already concluded. Anticipated new titles for the second half include the domestic release of Mu Archangel 2 and the entry of new Mu IP-based titles into the Chinese market. Sung Jong-hwa, a researcher at Ebest Investment & Securities, explained, “Since Webzen directly distributes and services Mu Archangel 2, the release schedule variable is relatively small. However, in the Chinese market, it is difficult to accurately predict whether and how many new Mu IP-based titles will be released.”

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