[Click eStock] SM, Clear Early-Year Low and 'Target Price Raised'

On the 18th, Kiwoom Securities upgraded its investment opinion on SM Entertainment (SM Entertainment) to "buy" and raised the target stock price from 127,000 KRW to 145,000 KRW. This decision was based on the judgment that achieving a "low in the first half, high in the second half" performance in the second half of the year is sufficient.

Namsoo Lee, a researcher at Kiwoom Securities, stated, "The cost increase due to the internalization of capabilities such as performances and MDs seen in the second quarter, as well as the sluggishness in advertising, are expected to have some negative impact in the second half as well." However, he added, "Starting with NCT Dream in the second half, the full NCT group and NCT 127 are scheduled to make comebacks, along with the addition of momentum from two new rookie boy groups and aespa's North American debut, making it sufficient to achieve a 'low in the first half, high in the second half' performance." He also predicted that this would prove the gradual strengthening of the multi-production center, a core strategy to achieve SM 3.0.

SM Entertainment's second-quarter sales amounted to 231.4 billion KRW, a 25.4% increase compared to the same period last year, and operating profit was 28.1 billion KRW, up 45.1% year-on-year, although it is estimated to fall short of consensus. Notably, this performance is understood to reflect the sale of 3.7 million albums including aespa, NCT DoJaeJung, and Taeyong's solo releases, as well as TVXQ's Japan tour, and world tours of NCT Dream and Red Velvet.

Separate sales reached 144.4 billion KRW, a 30% increase from the previous year, and operating profit was 27.1 billion KRW, up 13.6% year-on-year, expected to lead the performance. The researcher said, "With strengthened artist activities, the Japanese subsidiary and Dream Maker are expected to maintain continuous improvement following the previous quarter." However, he added, "Due to the sluggish advertising business caused by the economic downturn and additional costs incurred from functional efficiency and internalization following the management dispute, profitability is expected to decline slightly."

From the third quarter, comebacks of major artists are scheduled. EXO and NCT Dream made comebacks on the 10th and 17th respectively, and the full NCT group is scheduled to make a comeback in the third quarter. EXO, which started with 1.07 million copies sold on the first day of initial sales, achieved 1.56 million copies in initial album sales. NCT Dream, which achieved 4.1 million pre-orders, is expected to set a new group record, according to the researcher.

Aespa, preparing their US debut album in August, and the launch of NCT Tokyo planned to start broadcasting on the 27th, are expected to further strengthen the artist lineup. The researcher noted, "NCT Tokyo is expected to focus on marketing after the program to form fandoms and gain market recognition." He also explained, "The rookie boy group debuting at the end of August plans to increase the frequency of album releases in a short period, so artist activity in the second half is expected to be at its maximum."

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