[Click eStock] Pearl Abyss, Securities Firms Lower Target Price... "New Release Delay Negative"

Q3 Earnings Consensus Exceeded
'Bulgeun Samak' Release Expected in Second Half of 2023
New Title Sales Reflected from 2024
2023 Earnings Estimates Downgraded

[Asia Economy Reporter Hwang Yoon-joo] On the 10th, the securities industry collectively lowered the target price for Pearl Abyss. Despite the third-quarter earnings exceeding consensus, earnings estimates were downgraded due to the expected delay in the release of new titles.

Pearl Abyss recorded third-quarter sales of 97.3 billion KRW, a 0.9% increase from last year, and operating profit of 12 billion KRW, up 16.9%. The operating profit significantly exceeded the consensus of 2.5 billion KRW. This was due to a decrease in labor costs following the removal of an 8 billion KRW incentive that occurred in the previous quarter.

The reason securities firms lowered the target price for Pearl Abyss is the high likelihood of a delay in the release of the new title "Bulgeun Samak" (Red Desert). There is an analysis that expectations for new game development capabilities will remain negative for some time.

Accordingly, Shinhan Investment Corp. maintained a 'Buy' rating on Pearl Abyss but lowered the target price to 58,000 KRW.

Researcher Kang Seok-oh of Shinhan Investment explained, "'Bulgeun Samak's release is delayed more than expected, leading to a downward revision of the 2023 earnings estimates, and as the gap in new title releases prolongs, the target multiple was also lowered." He added, "Since it seems difficult to release any video within this year, investor expectations are expected to drop significantly until the release schedule or plans to participate and exhibit at global game shows are concretized, and this has been reflected."

eBest Investment & Securities also maintained a 'Neutral' rating and lowered the target price by 15.6% to 38,000 KRW.

Researcher Sung Jong-hwa of eBest Investment & Securities pointed out, "'Bulgeun Samak' is scheduled to complete development in the second half of 2023, so launching within 2023 is unlikely. Consequently, the sequential delay in the launch schedules of Dokkaebi and Plan 8 means that earnings forecasts beyond 2023 will inevitably be significantly downgraded, which is a major issue."

Yuanta Securities also maintained a 'Buy' rating but lowered the target price to 54,000 KRW. Researcher Jeong Eui-hoon of Yuanta Securities explained, "The actual game release is expected to be no earlier than the fourth quarter of next year, and the point at which sales will start in earnest is expected to be the first quarter of 2024," adding, "We lowered the 2023 earnings estimates and thus reduced the target price."

Korea Investment & Securities was the only firm that did not present a target price. Researcher Jeong Ho-yoon of Korea Investment & Securities pointed out, "Uncertainty related to new title development is increasing," and said, "Dokkaebi, which received much attention in 2021, had issues with staff departures, and currently the core development team is focused on developing Bulgeun Samak, so uncertainty regarding the schedule has further expanded."

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