[Click eStock] "Krafton Q1 Operating Profit Falls Short of Market Expectations... Target Price Down"

[Asia Economy Reporter Hwang Yoon-joo] Hyundai Motor Securities maintained a 'Buy' investment rating on the 24th but lowered the target price to 450,000 KRW, stating that the operating profit for Q1 2022 is expected to fall short of market expectations.

Hyundai Motor Securities analyst Kim Hyun-yong stated, "Q1 results are expected to show sales of 525.7 billion KRW (YoY +14.0%) and operating profit of 172.3 billion KRW (YoY -24.2%). While sales meet market expectations, profits are forecasted to fall short by 14%."

Analyst Kim analyzed, "Operating profit is inevitably expected to decline in profitability compared to the same period last year due to structural increases in labor and marketing costs."

Kim predicted a 'low-high' pattern for new releases this year. From Q2, with the full-scale global marketing of New State, he believes meaningful sales contributions will be possible starting in the second half of the year.

He explained, "Regarding the highly anticipated title Callisto Protocol, expected to launch in Q4, development is progressing on schedule targeting average expected sales of triple-A console games (5 to 10 million units). If 5 million units are sold, the expected annual sales revenue is 350 to 400 billion KRW, with an operating profit contribution of about 150 billion KRW."

Additionally, the company is rapidly expanding new businesses such as content, NFT, and VR, and stepped re-rating is expected as deals become more concrete.

Analyst Kim explained, "In the content sector, Tears of themis will be added as a new content IP this year, and the NFT business is believed to have started joint platform development in collaboration with Zepeto."

He added, "It is also positive that production has begun on the VR version of Unknown Worlds' steady-selling console game Subnautica, aiming for early access within a year."

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