Shinhan Investment Corp: "HYBE's Girl Group Launch Successful... Additional M&A Needed"

Girl group NewJeans

[Asia Economy Reporter Park So-yeon] Shinhan Financial Investment highlighted HYBE's record-breaking performance. They also emphasized the need for additional growth drivers capable of covering fixed costs, given the company's rapid expansion over the past five years.

According to FN Guide on the 21st, Shinhan Financial Investment recently released a report on HYBE, stating, "The company recorded its highest quarterly profit and successfully launched a girl group."

HYBE posted sales of 512.2 billion KRW and operating profit of 88.3 billion KRW in Q2 this year. These figures represent increases of 84% and 215% respectively compared to the same period last year, surpassing market expectations.

The company achieved its highest quarterly sales and operating profit since its founding, with 8.53 million albums sold. The results reflected BTS's Las Vegas concert, Seventeen's Japan fan meeting, and Seoul Gocheok Dome performances. Gains from foreign exchange due to the strong dollar were also significant. Net income attributable to controlling shareholders reached 97.7 billion KRW.

The new business, the game 'In the SEOM with BTS,' was also successfully launched, generating daily sales of approximately 200 million KRW.

The girl group launches were also evaluated as successful. LE SSERAFIM, which debuted in May, and NewJeans, which debuted in July, surpassed initial sales of 310,000 and pre-order volumes of 440,000 respectively, setting records for rookie groups.

Shinhan Financial Investment analyzed, "Until a complete generational shift occurs, it is a battle over fixed costs." Cost of sales includes content production expenses and artist royalties, so it is linked to sales. If BTS group sales gradually decline, cost of sales will also decrease. If the revenue contribution from rookie groups, which have a more favorable profit-sharing ratio for the company, increases, the cost ratio is likely to improve.

Shinhan Financial Investment stated, "The problem lies in selling and administrative expenses," adding, "The company's scale has grown significantly over the past five years." This growth was accompanied by label establishments, agency acquisitions, and large-scale recruitment for new businesses. Personnel and operating expenses, which are largely fixed costs, are overwhelmingly higher compared to other entertainment companies. This means operating profit can fluctuate greatly depending on sales. So far, the company has earned operating profits sufficient to cover fixed costs based on BTS as a major revenue source. Shinhan Financial Investment analyzed, "The key is to prove the ability to cover fixed costs and still generate profits as the largest revenue source gradually declines," and "Urgent additional M&A or recruitment of influential domestic and international artists who can directly contribute to profits is needed."

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