[Click eStock] "Studio Dragon, Solid 3Q Performance... Advertising Market Contraction Not Significant"

Daishin Securities maintained a buy rating and a target price of 89,000 KRW on Studio Dragon on the 16th, stating that the impact of the advertising market contraction is not significant and that the increase in the recoup rate will rather drive earnings. The recoup rate refers to the ratio of revenue recovered through content supply relative to production costs.

Studio Dragon's sales for the third quarter of this year are projected to decrease by 29% year-on-year to 160 billion KRW, and operating profit is expected to decline by 3% to 18.4 billion KRW.

Researcher Kim Hoe-jae of Daishin Securities explained, "The total number of production episodes is estimated to have decreased by 53 episodes year-on-year to 72 episodes," adding, "tvN advertising is improving compared to the first half, there are more simultaneous broadcasts with Over-The-Top (OTT) services and originals, and with contract renewals with OTT platforms, the recoup rate has increased, so despite the reduced number of episodes, decent profits are expected."

He continued, "One reason the stock price has fallen 45% since the beginning of the year is concerns that the contraction of the advertising market would significantly impact earnings. However, earnings directly linked to tvN advertising account for about 26%, and considering that tvN advertising decreased by 30% year-on-year, advertising-linked earnings are estimated to have decreased by about 4 billion KRW."

Researcher Kim also stated, "On the other hand, licensing revenue from OTT and others, which accounts for 65% of earnings, is estimated to have increased by about 15%, or approximately 5 billion KRW, compared to the same period last year," adding, "The effect of the increased recoup rate through contract renewals and new contracts with global OTT platforms has appeared."

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