[Click eStock] Krafton Q1 Earnings Miss Consensus... Investment Rating 'Neutral'

[Asia Economy Reporter Lee Seon-ae] Korea Investment & Securities announced on the 12th that it maintains a neutral investment opinion on Krafton. This is based on the judgment that the first-quarter earnings will fall short of consensus.

Korea Investment & Securities estimated Krafton's first-quarter revenue and operating profit at 486.3 billion KRW and 163 billion KRW, respectively. The operating profit consensus is 198.8 billion KRW, and the earnings are expected to fall short of consensus by 18%.

With the removal of one-time expenses that occurred on a large scale in the fourth quarter, Krafton's profit level is expected to recover to its usual level. However, Korea Investment & Securities' analysis suggests that a conservative view should still be maintained as New State, which was expected to drive earnings growth in 2022, remains sluggish.

Researcher Jeong Ho-yoon of Korea Investment & Securities said, "We estimate the net profit for 2022 at 603.8 billion KRW," adding, "Applying a price-to-earnings ratio (PER) of 25 times, which is generally assigned to large game companies, results in a target stock price of 310,000 KRW, but since New State, the growth driver for 2022 earnings, has failed, such a valuation is burdensome."

Researcher Jeong noted, "The company's strategy is to expand users and sales through marketing after a large-scale update in the second quarter, but since the initial success has already failed, actual results need to be confirmed," adding, "It is positive that the company recently announced active investment and research and development in new trends in the gaming industry such as VR, NFT, and Web 3.0, but it will be difficult for this to be reflected in the stock price before the actual release of new titles."

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