[Click eStock] "SM to Continue Growth Next Year"

IBK Investment & Securities Report

Source: SM

[Asia Economy Reporter Minji Lee] IBK Investment & Securities maintained a buy rating and a target price of 110,000 KRW on SM on the 24th. This is based on the judgment that the company will continue its performance improvement next year through global concert tours and new business initiatives.

SM's Q4 revenue and operating profit are expected to rise by 22.7% and 1866.3% year-on-year to 226 billion KRW and 26.5 billion KRW, respectively. Amid the expansion of the K-POP fandom and increased album sales of flagship artists' (NCT, aespa) IPs, the recovery in business segments such as concerts, advertising, and dramas is expected to drive overall company performance. Operating profit is predicted to record significant growth due to the base effect from the severe impact of COVID-19 in Q4 last year.

On a separate basis, Q4 revenue is forecasted to increase by 23.1% year-on-year to 124.3 billion KRW. Pre-orders for the flagship IP NCT’s full-length album ‘Universe’ reached 1.7 million copies, while sales of NCT127’s repackaged album and rookie girl group aespa’s mini-album are expected to be 1.15 million and 550,000 copies, respectively. Including other artist IP albums, total album sales in Q4 are projected to reach 440,000 copies. SMC&C is expected to record revenue of 44.1 billion KRW, up 2.6% year-on-year, benefiting from the advertising peak season in Q4. KeyEast’s revenue is forecasted to increase by 135% to 22.6 billion KRW, reflecting the effect of two works, ‘Gugyeongi’ and ‘Only One Person,’ being scheduled on Netflix and JTBC. Dream Maker is expected to post revenue of 7.9 billion KRW, a 17.3% improvement year-on-year, following the successful offline concert of NCT127 at Gocheok Dome.

This year’s record-high performance is expected to be followed by continued improvement next year. Hwanwook Lee, a researcher at IBK Investment & Securities, said, “The concert segment, which experienced a significant sales gap due to COVID-19, is recovering and expected to drive overall company performance.” He added, “The entry of new IPs on the platform of subsidiary DearU and the launch of NFT products are expected to become visible in the first half of the year.” Furthermore, offline concerts are planned to be conducted in a dual format with online in the future, which is expected to alleviate fixed cost burdens. The subsidiary SMC’s online concert streaming through Beyond Live is expected to improve conditions, leading to additional scale expansion and profitability improvement.

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