[Click eStock] "JYP, 3 Consecutive Quarters of 'Earnings Shock'... Target Price Down 7.5%"

Concerns Over Stray Kids' Contract Renewal Rate Not Reflected
Back-to-Back Comebacks in Second Half, Likely 'Sangjeohago'
Future Stock Key Is New IP Performance

Hana Securities on the 14th lowered the target price for JYP Ent. by 7.5%, from 80,000 KRW to 74,000 KRW, citing weak second-quarter earnings and a downward revision of the annual earnings forecast. The investment rating of 'Buy' was maintained. The closing price of JYP Ent. on the previous trading day was 54,600 KRW.

Researchers Kihoon Lee and Jiwon Hwang of Hana Securities stated, "JYP Ent. has recorded earnings below expectations (earning shock) for three consecutive quarters since the fourth quarter of last year," adding, "This year, the main cause was increased costs, and in particular, the re-contracting rate for Stray Kids has not yet been reflected, which inevitably causes concerns among investors."

The second-quarter earnings were 95.7 billion KRW in sales and 9.3 billion KRW in operating profit (operating margin of 9.7%), representing decreases of 37% and 80% respectively compared to the same period last year. Notably, the quarterly operating margin falling below 10% is the first occurrence since 2022. Unlike other major entertainment companies, JYP Ent. has been highly regarded for its profitability due to its focus on its core business. Compared to the previous quarter (Q1 2024) operating margin of 25%, this is a significant decline.

Researchers Lee and Hwang explained, "The main reason for the profitability decline was the increase in other costs, including 5 billion KRW in manufacturing costs from JYP 360, resulting in a cost ratio reaching 65.2%, the highest since Stray Kids' debut," adding, "Non-operating expenses included 1.7 billion KRW in donations."

In the second half of the year, Stray Kids, TWICE, NMIXX, and ITZY are scheduled to make comebacks. Last year's annual album sales were approximately 18 million copies, but in the first half of this year, sales were 4 million copies, with an expected 10 million copies in the second half, indicating a clear pattern of a weak first half and strong second half. The two researchers noted, "While a recovery in earnings is expected, the success of new intellectual properties (IP) is a very important factor at this point," and added, "In particular, the performance of the Loud Project and the Latin girl group (Bicha), both debuting in the second half, is expected to impact the stock price."

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