[Click eStock] "Krafton, New Release Gap This Year... Investment Rating 'Neutral'"

Samsung Securities Report

[Asia Economy Reporter Minji Lee] On the 5th, Samsung Securities downgraded its investment opinion on Krafton from "Buy" to "Neutral" and lowered the target price by 30% to 160,000 KRW. This decision was based on the expectation of further valuation declines due to the absence of new releases scheduled for this year.

The Callisto Protocol, released globally on the 29th of last month, has recorded growth below market expectations. It has been criticized for lacking content, insufficient differentiation from Dead Space, and optimization issues on platforms other than the PS5, leading to a drop in rankings. Currently, its sales rank on the US Play Store is 33rd, and on Steam, it has fallen below 200th place. Samsung Securities analyst Donghwan Oh stated, "The company expected cumulative sales of 5 million copies, but considering the current sales rankings, even cumulative sales of 2 million copies by next year seem unlikely."

Due to the underperformance of The Callisto Protocol and a decline in Battlegrounds Mobile revenue caused by the off-season effect, fourth-quarter sales are expected to increase by only 4.2% compared to the previous quarter. Increased expenses, including 30 billion KRW for new game marketing, 20 billion KRW in amortization related to the acquisition of Unknown Worlds, and 20 billion KRW for esports tournament costs, are expected to reduce fourth-quarter operating profit by 43% from the previous quarter to 79.5 billion KRW, which is only about half of the expected 161.7 billion KRW.

Analyst Oh explained, "With the suspension of new game development, there will be no major releases this year. While releases of sequels to Subnautica or new titles through acquisitions of new developers are possible, their contribution to sales will not be significant." Ultimately, the only variable for performance improvement is whether Battlegrounds Mobile's revenue rebounds until the release of Black Budget in 2024.

Reflecting the poor sales of The Callisto Protocol, Samsung Securities lowered its operating profit forecast for this year by 22%. Analyst Oh analyzed, "Krafton has released new titles such as Battlegrounds, Elyon, New State, and The Callisto Protocol but has consecutively failed to achieve hits. Until it proves its new game development capabilities and resolves the risk of dependence on a single game, further valuation declines are a concern."

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