[Click eStock] "Pearl Abyss, New Release Delay Makes Deficit Inevitable for Now... Investment Rating Down"

Meritz Securities downgraded its investment opinion on Pearl Abyss from 'Buy' to 'Hold' on the 10th, citing inevitable continued losses due to delays in new game releases. The target price was also lowered from 68,000 KRW to 40,000 KRW.

Researcher Lee Hyo-jin of Meritz Securities explained, "The release of the new title 'Red Desert' has been postponed to after 2025, making an expansion of losses next year unavoidable," adding, "Financial burdens are also increasing as loan maturities approach."

Pearl Abyss's Q3 performance this year significantly missed market expectations. Revenue was 84.9 billion KRW, down 12.7% year-on-year, and operating profit dropped 82% to 2.1 billion KRW. Lee estimated, "'Black Desert' PC sales increased only 28% compared to the previous quarter, maintaining a year-on-year decline," and analyzed, "By reverse-calculating the PC revenue of Black Desert presented by Pearl Abyss in July, current monthly sales have fallen to the low 10 billion KRW range, turning into a year-on-year decline."

The delay in the release of Red Desert is exacerbating difficulties with poor performance and financial burdens. Lee said, "Since launching Black Desert PC in December 2014 and the mobile version of the same game in February 2018, Pearl Abyss has had no new titles," adding, "At the August conference call this year, there were no revisions regarding the completion of Red Desert in the second half of this year or its possible release next year. Although dubbing was understood to be in progress in September, the completion date was postponed once again within three months."

Currently, Pearl Abyss holds 250 billion KRW in cash, and in July 2024, a 150 billion KRW corporate bond borrowed three years ago at a low interest rate (2.52%) will mature. Total borrowings, including this, amount to 300 billion KRW, exceeding the cash on hand. Lee explained, "The new title is expected to be released after six quarters, and the financial structure is weakening," adding, "Rising interest rates create an environment where investors cannot wait long, and the interest burden will increase when rolling over borrowings." He further added, "The company's plans have lost credibility, and without active content disclosure to appeal to investors, there will be no stock price momentum for the time being."

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