[Click eStock] Studio Dragon, Weak Performance in Second Half... Target Price Down 11.5%

Meritz Securities announced on the 17th that it expects Studio Dragon's profitability to remain sluggish until the second half of this year, lowering the target stock price by 11.5% from 61,000 KRW to 54,000 KRW. The investment rating was maintained at 'Buy.'

In a report released on the same day, researcher Jeong Jisoo of Meritz Securities analyzed, "The consolidated sales for the third quarter are expected to be 136.9 billion KRW, and operating profit 8.9 billion KRW, falling short of the market consensus (operating profit of 12.8 billion KRW). While the number of aired episodes is down 21.3% compared to the same period last year, the absence of tentpole productions is expected to cause a larger decline in sales. Additionally, the amortization expense of Tears of the Queen, which aired in the first quarter of this year, will continue to impact through the third quarter, leading to a slowdown in profit margins."

He projected this year's consolidated sales and operating profit to be 589.4 billion KRW and 38.1 billion KRW, respectively. Researcher Jeong stated, "The total number of aired episodes this year is expected to be 228, a decrease of 113 episodes compared to 341 episodes in 2023. The number of episodes aired in the first half (113 episodes) and the second half (115 episodes) are similar in scale, but considering that the cost of sales and selling and administrative expenses are typically higher in the fourth quarter, profitability in the second half is expected to be somewhat sluggish."

However, he anticipated that performance will improve next year due to contract renewals with Netflix and normalization of production volume following industry recovery. Researcher Jeong said, "Depending on the outcome of the ongoing contract renewal negotiations with Netflix, there is still a high possibility of improved margin rates per production. With the recovery of the advertising market and expansion of channel programming, the number of aired episodes is expected to normalize to 283 in 2025."

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