[Click eStock] "Pearl Abyss, Q2 Bottom Passed Expected... Target Price Up 16%"

KB Securities Report

[Asia Economy Reporter Minji Lee] On the 13th, KB Securities maintained a buy rating on Pearl Abyss and raised the target price by 16% to 80,000 KRW. Earnings estimates were revised upward considering the launch of Black Desert Mobile in China.

Second-quarter revenue increased by 32.8% year-on-year to 88.5 billion KRW. Operating loss recorded 6 billion KRW, turning to a loss and falling short of market expectations. Despite the transition of Black Desert PC to self-service in North America, sales increased by 7.6% quarter-on-quarter due to deferred revenue, but mobile and console sales decreased by 41.5% and 12.3% respectively compared to the previous quarter. Dongryun Lee, a researcher at KB Securities, said, “It is estimated that the operating loss was due to increased labor costs (45.9 billion KRW) caused by workforce expansion and one-time performance bonuses (estimated at 10 billion KRW).”

Black Desert Mobile received a foreign-invested game license in China last June. It is planned to be published by iDreamSky, a Tencent subsidiary. The release is expected in the fourth quarter, and initial sales are expected to rank within the top 10. Assuming daily sales of 3 billion KRW and a 20% royalty, related sales are expected to be fully reflected in 2022, with revenue of 847.9 billion KRW and operating profit of 344.4 billion KRW, representing increases of 117.9% and 809.9% respectively compared to the same period last year.

Contrary to initial expectations, the release schedule of Red Desert is expected to be delayed until the second quarter of next year. As the company focuses its capabilities on the launch of Black Desert Mobile in China, the release schedule of new games is expected to be sequentially postponed. Furthermore, the company announced that it is also promoting the entry of Black Desert PC into China, and if the China entry becomes visible in the first half of next year, additional delays for Red Desert are expected. Researcher Dongryun Lee explained, “We maintain the forecast that Red Desert will gain high popularity mainly in Western markets, estimating sales of 4 million copies in 2022 and revenue including item sales of 344.5 billion KRW.”

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