[Click eStock] "YG Entertainment, Increased Earnings Volatility Due to BLACKPINK... Target Price Down"

Target Price Revised Downward by 18% Compared to Previous Level

Hana Securities on the 4th downgraded the target price of YG Entertainment from 64,000 won to 78,000 won, citing increased annual earnings volatility depending on BLACKPINK's activity status. The investment rating was maintained as 'Buy.'

Lee Ki-hoon, a researcher at Hana Securities, said, "By changing the assumptions regarding BLACKPINK's activities, we adjusted the operating profit forecast to approximately 50 billion won in 2024 and about 90 billion won in 2025, resulting in an 18% downward revision of the target price compared to the previous estimate." He added, "The stock price is significantly undervalued at around 12 times the expected price-to-earnings ratio (PER) based on 2025."

YG Entertainment's Q4 earnings last year recorded sales of 109.4 billion won, down 12% year-on-year, and operating profit of 400 million won, a 98% decrease, falling short of consensus (average securities firm forecast). The researcher analyzed, "There were no major issues in the core business, but it is estimated that the subsidiary YG Plus underperformed compared to expectations. Although BabyMonster debuted, there was no album comeback, and merchandise (MD) sales performed well due to Treasure's tours in Korea and Japan."

Earnings volatility is expected to increase depending on BLACKPINK's activity status. The researcher explained, "BLACKPINK is expected to have repeated large-scale world tour-level tours and long hiatus periods. The previous 2024 earnings forecast assumed a comeback before the Olympics, but now it is assumed that there will be a comeback in Q4, followed by a world tour in 2025 and a comeback in 2026. Therefore, annual earnings volatility is expected to increase depending on BLACKPINK's activity status." He added, "Since BLACKPINK's earnings dependency is high, the stock price is also likely to experience similar fluctuations."

To reduce BLACKPINK's high earnings dependency, the activity of BabyMonster is considered important. The researcher stated, "To resolve this, BabyMonster as a complete group needs to be strong enough to break the competitive structure of solid female idol groups." He added, "It is necessary to confirm the impact of the album comeback in April."

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