[Click eStock] "Studio Dragon, Advertising Market Slump Is Temporary... Core Business Is 'Clear'"

Daishin Securities on the 7th gave Studio Dragon a 'Buy' investment rating and set a target price of 89,000 KRW.

Studio Dragon's sales for the second quarter of this year are expected to be 1.7 trillion KRW, with an operating profit of 13.8 billion KRW, representing an 8% increase in sales compared to the previous year, but a 49% decline in operating profit. The number of drama broadcast episodes expanded to 104, and simultaneous airing on Over-The-Top (OTT) streaming services increased by one compared to the previous year, indicating generally favorable conditions. However, earnings estimates were downgraded due to a contraction in the advertising market and the absence of sales of older works to Disney Plus.

Daishin Securities expects that the advertising-linked performance of Studio Dragon is only a temporary slump, and the outlook for its core content business remains bright. After signing simultaneous airing and original supply contracts with Netflix (2020?2022), Studio Dragon extended the contracts from 2023 in a direction that increases content volume. For simultaneous airing, a recovery and growth effect will begin this year, and original content that was in production since last year is currently airing, with the recovery and growth effect for originals expected to occur next year. Studio Dragon also signed a volume deal contract with Disney Plus, expecting to supply about four simultaneous airing titles annually. Although specific scale and conditions have not been disclosed, it is estimated to be similar to the level of Netflix.

This year, Studio Dragon is expected to supply more than 11 simultaneous airing contents to Netflix, Disney Plus, Amazon, and others, including (Ilta Scandal), (Please Take Care of This Life Too), (The Uncanny Counter 2: Counter Punch), , and (Tale of the Nine Tailed 1938).

Kim Hoe-jae, a researcher at Daishin Securities, analyzed, “Due to the contraction of the TV advertising market, we have lowered the earnings per share (EPS) forecasts by 12% and 16% for this year and next year, respectively. The advertising-linked performance is only a temporary slump, and the outlook for the core content business is favorable.”

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