[Click eStock] Netmarble Strengthens Stability and Momentum with SpinX Merger and New Game Releases

[Asia Economy Reporter Lee Seon-ae] IBK Investment & Securities announced on the 12th that it maintains a Buy rating and a target price of 180,000 KRW for Netmarble. This is because SpinX, a leading company in social casino games, has been consolidated, and multiple new games are scheduled to be released in the first half of 2022, which is expected to strengthen both earnings stability and momentum.

Seunghoon Lee, a researcher at IBK Investment & Securities, explained, "SpinX recorded sales of 328.9 billion KRW in the first half, and since the sales scale in the second half is larger, it is expected that more than 170 billion KRW in sales will be added to the company's performance in the fourth quarter." He added, "Due to the high operating profit margin characteristic of social casino games, overall profitability is expected to improve significantly even after additional amortization expenses following the merger."

In early November, Seven Knights 2 was globally released after improvements following its service launch in Korea. In the first half of 2022, Seven Knights Revolution and BTS Dream are scheduled to be released, and The Second Country will also be additionally launched in the global market. Furthermore, through its subsidiary, the company has established Metaverse Entertainment and is currently working on a K-pop virtual idol project with Kakao Entertainment.

Meanwhile, in the third quarter, Netmarble recorded sales of 607 billion KRW (YoY -5.5%, QoQ +5.2%), operating profit of 26.6 billion KRW (YoY -69.6%, QoQ +64.2%), and net profit attributable to controlling interests of 30.2 billion KRW (YoY -63.9%, QoQ -33.9%). Sales and operating profit fell short of consensus estimates by 12.7% and 62.4%, respectively. The shortfall was due to the performance of Marvel Future Revolution, released at the end of August, not meeting market expectations and the aging of existing games. The Second Country accounted for 20% of total sales as its sales were fully reflected, followed by Marvel Contest of Champions and The Seven Deadly Sins at 13% and 7%, respectively.

Operating profit underperformed market expectations as personnel expenses and marketing costs increased by 14.6% and 17.2% year-on-year, respectively. Personnel expenses rose due to an increase in staff at Lydia, acquired by the subsidiary Gem City, and marketing costs increased due to heightened promotions before and after the release of Marvel Future Revolution. Non-operating income and expenses decreased by 17 billion KRW quarter-on-quarter as the effect of the capital increase by HYBE, which occurred in the previous quarter, was removed.

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