[Click eStock] "Pearl Abyss, Expecting Earnings Rebound in Second Half... Target Price Down 50%"

IBK Investment & Securities Report

[Asia Economy Reporter Minji Lee] IBK Investment & Securities maintained a buy rating on Pearl Abyss on the 16th and lowered the target price by 50% from the previous level to 70,000 KRW. This decision was based on the judgment that although Black Desert Mobile is underperforming in China, expectations for the new games Red Desert and Black Clover will rise in the second half of the year.

In the first quarter, Pearl Abyss recorded sales of 91.4 billion KRW, a 9.4% decrease compared to the same period last year. Operating profit was 5.2 billion KRW, down 60.4% year-on-year. Sales were driven by growth in overall game revenue as PC and mobile sales of Black Desert IP games improved due to content and new class updates.

Sales of Black Desert IP games grew 5.8% quarter-on-quarter to 70.9 billion KRW. Excluding other sales from Pearl Abyss Capital in the fourth quarter of last year, the game business showed signs of recovery. Operating profit exceeded market expectations as labor costs and advertising expenses decreased compared to the previous quarter. Labor costs and advertising expenses fell by 0.6% and 42.6%, respectively, quarter-on-quarter. Although the total number of employees increased by 15.6% year-on-year, it decreased by 5.5% quarter-on-quarter, suggesting limited quarterly volatility this year.

New game momentum is expected in the second half of the year. Momentum is anticipated from the new games Red Desert and Black Clover. Researcher Seunghoon Lee said, “Due to the poor performance of Black Desert Mobile released in China in April, we significantly lowered this year’s earnings forecast. Since it is a game that succeeded in domestic and overseas markets, we believe the disappointment from failure has already been strongly reflected.”

It is expected that the stock price rebound will begin when the release schedule for the console and PC-based Red Desert becomes clear in the second half of the year. Since the in-game footage released in 2020 received favorable reviews from global gamers and expectations have grown, it is estimated to contribute significantly to performance improvement when released in the fourth quarter.

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