[Click eStock] DearU "Expecting Earnings Growth... Undervalued Range"

[Asia Economy Reporter Lee Seon-ae] Leading Investment & Securities analyzed DearU on the 8th, stating, "Significant earnings growth is expected, and the current stock price level is undervalued compared to other entertainment stocks." No investment opinion or target price was provided.

DearU's average number of subscribers in the third quarter reached 1.45 million, an increase of about 100,000 compared to the second quarter of this year. If this trend continues, it is expected that the number of paid subscribers will exceed approximately 1.55 million by the end of this year. The third quarter results reflect the effects of the full reopening, including the resumption of offline concerts and new subscriptions (e.g., Nmix). As the year-end approaches, an increase in paid subscribers is anticipated due to various activities such as world tours by major resident artists. The entry of internationally renowned artists into DearU is expected from the end of this year to early next year, and the ‘Fan Club’ service is also scheduled to launch in the fourth quarter.

For example, Stray Kids is expected to recruit global fans through the DearU platform, which will lead to additional increases in MAU. Additionally, the official launch of ‘Bubble Live (real-time streaming)’ and the ‘Digital Item Store,’ which began as beta services at the end of August, is also a positive factor for MAU growth.

The planned entry into the Chinese market, initially scheduled for the third quarter, is now expected to begin in the fourth quarter. The company plans to aggressively target the Chinese market through Android services, anticipating a meaningful increase in paid subscribers.

In the third quarter of this year, revenue increased by 14.1% year-on-year to 12.2 billion KRW, while operating profit decreased by 3% to 4 billion KRW, falling short of market consensus. The main reasons for the slight decline in operating profit compared to the previous year were increased labor costs and expenses related to stock options. On the other hand, a high exchange rate effect resulted in a foreign currency translation gain of 2 billion KRW and foreign exchange gains of 1.1 billion KRW due to dollar-denominated revenue settlements.

As of the third quarter this year, foreign ownership accounted for about 76%, and the benefits of a high exchange rate due to a high proportion of overseas sales are expected to continue. The forecast for this year is revenue of 48.7 billion KRW (+21.7%) and operating profit of 16.4 billion KRW (+24.2%).

Researcher Yuseongman of Leading Investment & Securities emphasized, "Next year, with the entry into China and increases in subscriber numbers and subscriptions per person, as well as the launch of the ‘Digital Store,’ we expect significant earnings growth with forecasted revenue of 80.2 billion KRW (+64.8%) and operating profit of 33.5 billion KRW (+104.2%). The current stock price is undervalued."

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