[Click eStock] "Krafton, Strengthening New Release Momentum Despite Expected 2Q Earnings Estimate Shortfall"

[Asia Economy Reporter Lee Jung-yoon] IBK Investment & Securities maintained a buy rating and a target price of 360,000 KRW for Krafton on the 6th, stating that although the company's Q2 earnings are expected to fall short of consensus estimates, an improvement in Q3 performance is anticipated.

Krafton's Q2 revenue this year is estimated at 465.4 billion KRW, a 1.1% increase year-on-year, while operating profit is expected to be 165.4 billion KRW, down 5%, falling short of consensus. Seung-hoon Lee, a researcher at IBK Investment & Securities, explained, "The effect of the peak season in China has disappeared, and with a slowdown in performance compared to the previous quarter, mobile game sales are expected to decline by 14% quarter-on-quarter. However, PUBG Mobile traffic remains strong, and the localization strategy in India has succeeded, leading to an increase in PUBG Mobile India (BGMI) sales."

He added, "For online games, a large-scale update including a new map and a new business model is scheduled for Q3, and since unused free coins remain, Q2 performance slightly slowed down. Operating profit is expected to fall short of consensus due to limited reduction in labor costs as subsidiary personnel are consolidated and increased commission fees." Additionally, esports expenses in Thailand and outsourcing processing costs before the release of new games were analyzed to have risen.

However, performance improvement and strengthened new game momentum are expected in Q3. For mobile games, sales in China are expected to rebound, and the effect of the NEWSTATE update is anticipated. For online games, a large-scale update is also scheduled, increasing the likelihood of sales growth.

Furthermore, at the end of Q3, Project M developed by Unknown Worlds, a U.S. game console developer acquired in November last year, is scheduled for release. Core content such as competitive matches is expected to be included next year, and the contribution to earnings in the second half of 2023 is expected to be significant with the global release of both PC and mobile versions, rather than in Q4.

Additionally, the most anticipated title for Q4, The Callisto Protocol, is scheduled for release on December 2. Pre-orders are currently underway for PC, PlayStation 4 (PS4), PlayStation 5 (PS5), and Xbox.

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