[Click eStock] "SM, the Most Undervalued Agency"... Target Price Up

[Asia Economy Reporter Ji Yeon-jin] Hana Financial Investment announced on the 16th that it is raising the target stock price of SM Entertainment to 105,000 KRW, considering the resumption of offline performances and the reflection of dramas, stating that it is the most undervalued agency.

Lee Ki-hoon, a researcher at Hana Financial Investment, said, "This year's expected operating profit is about 85 billion KRW, and even if only the incremental 15 to 20 billion KRW implied within the DearU guidance is reflected, it exceeds 100 billion KRW," adding, "It is too underestimated even when considering the turnaround of Japan and Dream Maker due to the resumption of offline tours and the rebound of KeyEast."

SM Entertainment's third-quarter sales and operating profit were 154.4 billion KRW and 14.1 billion KRW, respectively, up 34% and 109% compared to the same period last year. Except for an additional one-time cost of 4 billion KRW due to the change from annual incentive reflection in the fourth quarter to semi-annual settlement, the results are in line with market expectations.

The separate operating profit was 17.5 billion KRW (+355%), with an additional approximately 1 billion KRW recorded as the last office relocation cost excluding incentives. Operating profits by subsidiaries were sluggish, with C&C, KeyEast, Dream Maker, and Japan posting -400 million KRW, -700 million KRW, -1 billion KRW, and -2.1 billion KRW, respectively, except for DearU, which is expected to achieve maximum quarterly performance in the future with 4.2 billion KRW (+468%).

In the fourth quarter of this year, improvements are expected due to the advertising peak season (C&C), drama broadcasts (KeyEast), and the resumption of performances (Dream Maker). The expected operating profit for the fourth quarter is 28.2 billion KRW (+1,993%), considering the DearU listing fee of 3.2 billion KRW.

aespa is expected to show the highest level of monetization process ever achieved by a girl group. Although there is no exact album sales volume that serves as the standard for dome tours, considering that both TWICE and BLACKPINK surpassed 300,000 copies in their third year since debut when their dome tours started, aespa’s first album sales have exceeded 500,000 copies, conservatively estimated at a pace that can reach 1 million copies per album within two years. This means a dome tour is possible within two years.

The researcher said, "aespa’s albums are composed around a worldview similar to BTS, and they have a story that can serve as a focal point for fandoms in the metaverse era, which suggests tremendous scalability."

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