[Click eStock] "Kakao Games, Painful Slump of Odin and Uma Musume"

Eugene Investment & Securities Report

[Asia Economy Reporter Minji Lee] Eugene Investment & Securities maintained a buy rating on Kakao Games on the 19th but lowered the target price by 17.4% to 57,000 KRW.

Kakao Games' expected sales for the third quarter are 326 billion KRW, with an operating profit of 56.8 billion KRW. Sales are expected to decrease by 30%, and operating profit is predicted to fall significantly short of the market estimate of 73.7 billion KRW.

This is due to the main games Odin and Uma Musume recording sluggish sales from September. Odin's sales ranking for "Odin: Shinban" maintained an average position between 6th and 10th in July and August but dropped to around 20th place in early September, showing weakness. Uma Musume also saw a sharp decline in sales ranking in September due to user dissatisfaction. Considering this, the estimated daily sales for Odin and Uma Musume in the third quarter are 1.2 billion KRW and 700 million KRW, respectively. Regarding operating expenses, commission fees are expected to increase compared to the previous quarter due to a decrease in the sales proportion of self-developed games.

The delay in Lionheart Studio's IPO is not a cancellation, so it is unlikely that the stock price discount will be fully resolved. The sales proportion from Odin accounts for about 46% of Kakao Games' sales as of the second quarter, so if the IPO proceeds, the stock price will inevitably be discounted. Jung Eui-hoon, a researcher at Eugene Investment & Securities, said, "If the proportion of game sales other than Odin increases until the postponed IPO date, the stock price burden could be reduced."

The remaining new releases scheduled for this year are the collection-type RPG game EverSoul and the survival FPS Distera. However, considering the remaining period, it is highly likely that one of the two will be postponed to next year. Researcher Jung said, "Whether the release will be delayed and the lineup and release schedule of new titles for next year will be detailed in the third-quarter earnings announcement," adding, "The target price is adjusted downward based on the downward revision of major game sales estimates."

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