[Click eStock] SM, Year of Monetization "Top Preferred Stock in Entertainment"

[Asia Economy Reporter Lee Seon-ae] Kiwoom Securities announced on the 25th that it maintains a buy rating and a target price of 105,000 KRW for SM. It was also presented as the top preferred stock in the entertainment industry. This is based on the judgment that significant profitability growth will be achieved this year.

SM recorded Q4 sales of 206.5 billion KRW (yoy +12.1%) and operating profit of 11.5 billion KRW (yoy +754.9%, OPM 5.6%), falling short of consensus. Although there were strengths in separate album and music sales, peak advertising season, and improvements in the drama business area, negative factors included the non-reflection of DearU's performance reclassified as an affiliate, delayed recognition of NCT 127 concert revenue, and one-time costs such as bonuses.

Kiwoom Securities expects the fandom effects of NCT 127 and NCT Dream, who have risen as global artists, to prominently lead SM's growth. NCT, NCT 127, and NCT Dream, which showed overwhelming album sales, are judged to expand their activities through concerts and embark on a path of full-scale monetization. Red Velvet's solo concert will be held online and offline in March, and NCT 127's offline concert in Japan is planned for Q2, forecasting a brilliant revival of concerts and MD, the core revenue elements of entertainment.

Additionally, KiEast, preparing two tentpole dramas in 2022, and SM C&C, expected to grow due to advertising and travel business recovery following reopening, are anticipated to show growth. The resumption of concerts is also expected to impact the improvement of Japanese performance after adjustments in Dream Maker and channel business, and such subsidiary improvements are likely to fully offset the exclusion of DearU's consolidated results.

Recently, the metaverse and NFT-related business, which signed partnerships with Binance and The Sandbox, is steadily preparing and expected to leverage expansion. Kiwoom Securities analyst Namgil Lee said, "We forecast SM's 2022 sales at 934.3 billion KRW (yoy +33.2%) and operating profit at 118.6 billion KRW (yoy +73.2%)," adding, "We consider it the top preferred stock in entertainment."

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