Reopening Optimism Grows... Will Entertainment Stocks with Record-Breaking Performance Sail Smoothly This Year Too?

by Kwon Jaehee

Published 01 Mar.2022 12:40(KST)

▲BTS [Image source=Yonhap News]

[Asia Economy Reporter Kwon Jaehee] Entertainment stocks are gaining attention. This is due to many major entertainment companies achieving record-breaking performances last year, combined with expectations for this year's reopening. Accordingly, Shinhan Financial Investment has newly issued a 'Buy' investment rating for the four major entertainment companies.

Shinhan Financial Investment newly issued a 'Buy' rating and a target price of 89,000 KRW for the entertainment company YG Entertainment (YG).

YG achieved its highest performance last year with sales of 355.6 billion KRW and operating profit of 50.6 billion KRW. The operating profit far exceeded the market forecast of 40 billion KRW.

Following last year's record-breaking performance, even greater expectations are held for this year as YG's artists are expected to be fully active. Activities scheduled for this year include the comeback of Big Bang, the boy group Treasure entering a full growth trajectory, and the full-group comeback of Blackpink. Additionally, a rookie girl group is set to debut this year, and boy groups Winner and iKON will return in the second quarter.

Researcher Ji Inhae of Shinhan Financial Investment said, "We are initiating coverage with a Buy rating on YG," adding, "Without changes in artists' revenue sharing, full activation of all stars' activities will sustain high growth, and the picture of operating the Weverse platform and NFT strategy, similar to HYBE, is expected to become increasingly visible."

▲TWICE [Image source=Yonhap News]

For JYP Entertainment, a new Buy rating and a target price of 62,000 KRW were issued.

Researcher Ji analyzed, "JYP's greatest strength is its core business competitiveness," and explained, "By focusing solely on developing and producing artists' intellectual property (IP), it boasts higher profitability compared to other listed entertainment companies."

Through this, high growth and profitability are expected again this year, as hybrid concerts and the strengthening fandoms of existing stars continue. Centered on the key artist Twice, growth-driving artists Stray Kids and the development of rookie groups are also contributing.

▲Red Velvet

SM Entertainment also received a new Buy rating with a target price of 93,000 KRW.

SM recorded its highest performance last year as well, with sales of 701.5 billion KRW and operating profit of 68.5 billion KRW, demonstrating fandom competitiveness through high growth in IP performance and explosive album sales, similar to other entertainment companies.

Researcher Ji noted, "Two notable changes were observed at SM: net profit and the first dividend since its founding."

He added, "The importance of these changes lies in the fact that, for the first time since 2019, SM has responded to shareholder letters with concrete actions."

▲BLACKPINK [Image source=Yonhap News]

Finally, Shinhan Financial Investment newly issued a Buy rating and a target price of 330,000 KRW for HYBE.

Researcher Ji evaluated, "HYBE has focused on its core music business while acquiring Naver's V Live, investing in YG Plus, acquiring domestic agencies, and launching the world's first fandom platform 'Weverse,' making it no exaggeration to say it has dominated the global music market."

HYBE's growth momentum is expected to accelerate further this year.

Researcher Ji interpreted, "This is because offline (including hybrid) concerts, which will fully resume starting in March, and the results of HYBE's new business strategy 'Boundless,' announced last November, are being revealed."

HYBE is developing and releasing artists' images not only through music but also via the genre of 'original stories' in various IPs such as webtoons and animations. Additionally, it has established a joint venture with Dunamu for the NFT business and is preparing to launch the platform by mid-year.