[Click eStock] "YG Entertainment Should Lower Profit Expectations... Target Price Down 18%"

SK Securities Report

[Asia Economy Reporter Minji Lee] On the 20th, SK Securities maintained a buy rating on YG Entertainment (YG Entertainment), despite lowering its earnings estimates, and set a target price of 70,000 KRW, down 18% from the previous target.

Fourth-quarter sales are expected to reach 80.1 billion KRW, and operating profit 5.2 billion KRW, down 4% and 5% respectively compared to the same period last year. Although two offline concerts and fan meetings were held for the first time since COVID-19, the contribution to profits is expected to be low due to seating restrictions. Album sales dropped 82% year-on-year to 297,000 copies. There were no new releases except for Song Minho's solo album (90,000 copies). Non-operating losses are expected to partially reflect valuation losses on TME shares and losses related to dramas produced by Studio Plex.

This year, active promotions from artists who had limited activities last year are expected. It is assumed that Treasure will be active in the first quarter, Blackpink in the second quarter, and a new rookie girl group will debut in the second half. Nam Hyoji, a researcher at SK Securities, said, "With more activities from major artists, the synergy effect with YG Plus, which is focused on the entertainment business, could be higher than ever," adding, "Having powerful artist IP means there are many opportunities for IP diversification as an agency, and actively developing new businesses increases the likelihood of success."

SK Securities lowered its operating profit estimate for this year by about 15% to 54 billion KRW. Following the decline in earnings estimates, the target stock price was also adjusted downward. Researcher Nam forecasted, "However, considering the resumption of offline activities this year, strengthening of IP, and the possibility of diversifying IP revenue, the company’s stock price still has room to rise."

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