[Click eStock] "SM, undervalued based on core business value alone"

[Asia Economy Reporter Kwon Jae-hee] Daishin Securities maintained a 'Buy' rating on SM Entertainment on the 21st and raised the target price to 150,000 KRW.

SM Entertainment recorded sales of 256.4 billion KRW and an operating profit of 25.2 billion KRW in the fourth quarter of 2022, surpassing consensus estimates in both sales and operating profit.

By segment, the entertainment division posted separate sales of 151.1 billion KRW. Despite a decrease in album sales compared to the previous quarter, an increase in digital music sales appears to have driven album revenue. Due to an increase in concerts and the operation of the NCT Sanrio pop-up store, MD sales rose to 39.8 billion KRW. Dream Maker sales reached 26.7 billion KRW, indicating continued strong performance of performances since the reopening.

In particular, SM Entertainment's stock price has been on the rise amid opposition from management to the acquisition following HYBE's public tender offer and the competitive battle for controlling shares. Going forward, the results of provisional injunction applications, news related to the share competition, and the outcomes of the general shareholders' meeting are expected to act as stock price momentum. However, apart from the share competition, considering SM Entertainment's 2023 management plan, structural growth in scale and improvement in profit margins are expected through management efficiency measures such as strengthening company-wide artist activities under a multi-label system and the termination of the Like planning contract.

Lee Ji-eun, a researcher at Daishin Securities, analyzed, "The profit margin improvement in the core entertainment business is expected, and the stock is undervalued based solely on fundamental value," adding, "A stock price correction should be seen as a buying opportunity."

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