[Click eStock] "Pearl Abyss Expected to Turn to Deficit... Investment Opinion and Target Price Downgraded"

[Asia Economy Reporter Hwang Yoon-joo] Ebest Securities on the 11th forecasted that Pearl Abyss's Q2 sales will slightly increase, but operating profit will turn to a loss. Accordingly, the investment rating was downgraded to 'Hold,' and the target price was lowered by 26% from 73,000 KRW to 54,000 KRW.

Researcher Seong Jong-hwa of Ebest Securities stated, "We estimate an operating loss of 2.3 billion KRW in Q2, turning to a deficit compared to the previous quarter."

Researcher Seong explained, "Operating profit will turn to a loss compared to the previous quarter due to a sharp increase in operating expenses caused by a surge in labor costs and marketing expenses. The surge in labor costs is due to the payment of treasury stock incentives amounting to 8 billion KRW, and the increase in marketing expenses is due to the base effect following an unusually sharp decline in the previous quarter."

The Q2 operating performance forecast is slightly below market consensus for sales and significantly below for operating profit. The expected operating loss is attributed to excess labor and marketing expenses.

Researcher Seong noted, "We newly recognized that the payment of treasury stock incentives is a structural cost recurring every Q2. Advertising expenses in Q1 (8.2 billion KRW) were unusually low beyond efficiency, and normally, the quarterly minimum level of around 10 billion KRW is the threshold."

Regarding sales, the existing regions of Black Desert Mobile continue to stabilize downward, but a rebound in Black Desert PC and console, along with new contributions from the launch of Black Desert Mobile China in April, are expected to result in a slight increase compared to the previous quarter.

However, Researcher Seong evaluated, "Black Desert Mobile China is considered a commercial failure, with estimated daily sales in Q2 not even reaching 300 million KRW, falling short of pre-launch expectations."

Researcher Seong diagnosed, "We have significantly raised the forecast for key policy investment costs affecting profitability, such as labor and advertising expenses. Additionally, due to the postponement of major new releases like Black Clover Korea/Japan and Crimson Desert Global, sales forecasts have been lowered, leading to a substantial downgrade in performance outlook."

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