[Click eStock] "Studio Dragon, Profitability Expected to Strengthen with Expanded Program Scheduling"

Kiwoom Securities Report

[Asia Economy Reporter Minji Lee] Kiwoom Securities maintained a buy rating and a target price of 130,000 KRW for Studio Dragon on the 13th. This is because sales are expected to improve due to the increase in the number of major productions and OTT-oriented sales.

First-quarter sales are estimated to have increased by 12% year-on-year to 131.4 billion KRW, and operating profit by 6.5% to 19.2 billion KRW. Major works include Netflix originals such as "Juvenile Justice," "Bulgasal," and "Twenty-Five Twenty-One," iQIYI original "Bad and Crazy," TVING original "King of Pigs," and TV-oriented productions like "Military Prosecutor Doberman" and "Superior Day." Additionally, delayed recognition of revenue related to "Jirisan" is taking place, and the reduction in episode recognition in the first quarter due to scheduling of 8 to 12-episode works is expected to be offset by OTT diversification, lowering the possibility of profitability damage.

This year, it is expected that both the top line and profitability will improve, escaping last year's poor scheduling. A total of 32 productions are planned, divided into 19 for TV and 13 for OTT, with increasing digital sales expected to generate performance leverage. OTT platforms, in addition to TVING, include Netflix, Disney Plus, Apple TV Plus, and iQIYI, leading to an all-around portfolio expansion that is anticipated to be a key growth driver.

Namsoo Lee, a researcher at Kiwoom Securities, explained, "With the benefits from digital platforms leading to an increase in the number of productions and securing profitability as a baseline, and the scale of production per work also rising, more attention should be paid to the company's margin improvement trend. Considering the additional benefits from global OTTs entering the domestic market and the fact that, except for Netflix, there have been no significant sales of older works, the simultaneous level-up of the company's new and old work sales is a highly feasible scenario."

With the entry of global OTTs into the domestic market and the K-drama boom overseas, it is predicted that IP holders' leverage will be strengthened. The production capacity and viewing time limitations of the domestic drama content market are expected to be resolved through global OTT expansion, leading to a reevaluation based on international drama production beyond the tentpole level in the future.

Researcher Namsoo Lee analyzed, "The steady increase in production costs per episode is likely to contribute more to profitability growth due to improved production scale rather than the burden of rising costs. The company's performance level-up, having entered a phase of maintaining or renewing its maximum production scale, is expected to continue."

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