BTS Activity Temporarily Suspended, HYBE Stock Also 'Slumps'

BTS Announces Suspension of Group Activities
Stock Price Plummets 27% Compared to Previous Day
Market Cap Drops Over 2 Trillion Won in One Day

Uncertainty Due to Military Enlistment
Brokerage Firms Lower Target Prices

[Image source=EPA Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] The group BTS (Bangtan Sonyeondan) announced a temporary suspension of group activities after 9 years since their debut, causing HYBE's stock price to plummet. Uncertainties related to BTS's military enlistment, interest rate hikes from the U.S., and the declining appeal of growth stocks due to the macroeconomic environment have also led securities firms to lower their target prices for HYBE.

As of 10:22 a.m. on the 15th, HYBE's stock price traded at 140,000 KRW, down 27.46% from the previous trading day. HYBE reached an all-time high of 421,500 KRW on November 17 last year, thanks to BTS's popularity. In just seven months, it has plunged more than 280,000 KRW. During this period, the market capitalization sharply dropped from 17.43 trillion KRW to 5.79 trillion KRW. The market cap decrease on this day alone was 2.19 trillion KRW.

HYBE's stock price nearly hit the daily limit down in one day due to the shockwave from BTS's announcement of a temporary suspension of activities the day before. BTS announced the temporary suspension of group activities during a live broadcast on YouTube. BTS accounts for the majority of HYBE's revenue. In 2020, 87.7% of HYBE's revenue came from BTS. Although this ratio decreased to 67% last year when revenue increased from around 790 billion KRW to 1.25 trillion KRW, BTS still holds absolute influence.

Due to this BTS hiatus, a reduction in HYBE's operating profit forecast is inevitable. Hana Financial Investment projected operating profits of approximately 200 billion KRW and 370 billion KRW for 2023 and 2024, respectively, under a conservative scenario. Lee Ki-hoon, a researcher at Hana Financial Investment, said, "The term 'temporary suspension' likely implies a euphemism for military enlistment. While we need to pay attention to official news regarding military enlistment, under a conservative scenario, HYBE's earnings impact is unavoidable."

Hana Financial Investment estimated that under the assumption that BTS members enlist, a performance gap would appear in 2025-2026 when four members enlist. The most conservative scenario assumes all members enlist at the beginning of 2023, estimating a BTS-related revenue decrease of about 750 billion KRW in 2023, with approximately 500 billion KRW from albums and tours and about 250 billion KRW from indirect sales such as merchandise.

Reflecting this, the estimated revenue and operating profit for 2023 are 1.6 trillion KRW and 200 billion KRW, respectively. The estimated revenue and operating profit for 2024 are 2 trillion KRW and 370 billion KRW, and for 2025, 2.6 trillion KRW and 500 billion KRW, respectively.

Previously, the securities industry lowered investment opinions and target prices for HYBE due to the macroeconomic environment surrounding HYBE, uncertainties related to BTS's military enlistment, and the absence of announced tour schedules despite a comeback. Hana Financial Investment maintained a 'Buy' rating for HYBE but lowered the target price by 16% to 360,000 KRW. Meritz Securities downgraded its investment opinion to 'Hold' and lowered the target price from 260,000 KRW to 240,000 KRW.

Lee Hyo-jin, a researcher at Meritz Securities, also said, "Assuming BTS unit activities due to some members' enlistment, a profit decline in 2023 is inevitable. However, due to uncertainty about the extent of the downside, the stock price is expected to remain sluggish until the impact of BTS's absence is confirmed numerically."

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