[Click eStock] "Krafton Q1 Below Expectations... Still Need to Wait and See"

[Asia Economy Reporter Myunghwan Lee] DB Financial Investment announced on the 13th that it expects Krafton to deliver below-expectation results for the first quarter of this year and has lowered its target price from 350,000 KRW to 310,000 KRW. However, the investment rating was maintained as Buy.

DB Financial Investment forecasts the company's first-quarter revenue to increase by 11% year-on-year to 513 billion KRW, while operating profit is expected to decrease by 31% year-on-year to 157 billion KRW. Operating profit is projected to increase by 265% compared to the previous quarter. However, these figures are expected to fall short of market estimates of 513.2 billion KRW in revenue and 195.4 billion KRW in operating profit.

By segment, PC traffic acquisition strategies aligned with the January transition to free-to-play continued, but revenue conversion has not yet fully materialized, so revenue is expected to be similar to the previous quarter. Mobile revenue is expected to increase compared to the previous quarter due to the peak season of the Chinese version of the flagship title "Battlegrounds Mobile," called "Hua Ping Jing Ying." However, the situation for "New State," released in November last year, is expected to remain largely unchanged.

Operating expenses are expected to decrease compared to the previous quarter, which included costs related to hosting the international Battlegrounds tournament "PUBG Global Championship (PGC) 2021" and the launch of New State. However, profitability is expected to decline compared to last year due to changes in the performance bonus allocation criteria and increased labor and marketing costs related to advertising in the Indian market for Battlegrounds Mobile.

Researcher Hyunjoon Hwang of DB Financial Investment noted, "Although New State's performance has been underwhelming, a turnaround is expected through repositioning marketing in the second quarter, and the upcoming release of 'The Callisto Protocol' in the fourth quarter is also a key point to watch." Assuming New State's daily revenue of approximately 700 million KRW and initial package sales of 1.5 million units for The Callisto Protocol in the fourth quarter, Krafton's annual revenue and operating profit are expected to increase by 19% and 8% year-on-year, respectively.

Researcher Hwang added, "Achieving results beyond these assumptions will likely be necessary for stock price appreciation. It is important to monitor the outcomes of New State's repositioning efforts utilizing the globally successful intellectual property (IP) 'Battlegrounds,' so we maintain our Buy rating."

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