BTS Enlistment Controversy Ends... HYBE Stock Soars as Uncertainty Clears

Price Rose to 124,000 Won Intraday on the 18th
Resolution of Enlistment Uncertainty Acts as a Positive Factor
Profit Decline Inevitable, BTS Dependency at 60%
HYBE "Efforts to Minimize Sales Impact, Will Achieve Results in New Businesses"

[Asia Economy Reporter Minji Lee] As the enlistment issue of BTS became more concrete, the stock price responded with a significant rise. It is interpreted that the resolution of the enlistment concerns, which had suppressed investor sentiment for a long time, was taken as an investment opportunity.

As of 9:48 a.m. on the 18th, HYBE's stock price was trading at 122,000 KRW, up 6.09% from the previous trading day. The intraday high was 124,000 KRW. The news that BTS had begun concrete preparations to fulfill their military service obligations after the previous day's market close was interpreted as positive. According to HYBE, starting with the cancellation of enlistment postponement for the eldest member Jin at the end of this month, all members plan to follow the Military Manpower Administration's enlistment procedures. Since BTS is currently on a break, they plan to carry out individual activities in the first half of next year and resume full-group activities in 2025, three years later.

Securities experts unanimously agreed that the resolution of military-related uncertainties could lead to a short-term rebound in the stock price. The biggest factor that had exerted downward pressure on the stock price was the enlistment issue of BTS. In fact, HYBE's stock price had plummeted more than 67% since the beginning of the year due to BTS's hiatus and military uncertainties. This contrasts with JYP Entertainment, which saw its stock price rise by about 13% annually, supported by the resumption of artists' performances and global interest in K-pop.

Experts noted that with the conclusion of the BTS military debate, a rapid re-evaluation of other artists within the company could begin. Hyunji Lee, a researcher at Eugene Investment & Securities, said, "Attention should be paid to the expansion of tour scales for affiliated artists such as Seventeen, Tomorrow X Together, and ENHYPEN, as well as the rapid growth of rookie artists," adding, "At least four rookie artists are expected to debut targeting the global market next year." He further analyzed, "Although earnings decline is inevitable due to BTS's absence and increased rookie artist development costs, the rookie momentum is crucial at this time."

However, investors' concerns about earnings are unlikely to disappear completely. Since BTS has been the main driver of HYBE's revenue growth, there will inevitably be a revenue gap during the 'military hiatus (enlistment + break period).' Even looking at the third quarter's album and digital music performance, revenue is expected to decrease by about 100 billion KRW compared to the second quarter (219 billion KRW), when BTS released an album. The total operating profit for the third quarter is estimated at 57.7 billion KRW, a sharp decline of about 35% compared to the second quarter (88.3 billion KRW).

HYBE has been striving to reduce its dependence on BTS (90% as of 2020) by increasing the revenue scale of boy groups such as Seventeen, ENHYPEN, and Tomorrow X Together, and accelerating the monetization of rookie girl groups like LE SSERAFIM and NewJeans. However, BTS still accounts for more than 60% of the company's revenue as of this year.

Meanwhile, HYBE explained in a shareholder letter yesterday, "To minimize revenue impact, we plan to release pre-produced content such as photo shoots of BTS members," and added, "We will expand the boundaries of our existing entertainment business through the Weverse platform, games, and NFT business."

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