[Click eStock] "Kakao Games, Earnings Improvement Expected from Second Half... Target Price Down"

Target Price Lowered by 15% Compared to Previous Estimate

On the 22nd, KB Securities downgraded the target price of Kakao Games from 20,000 KRW to 17,000 KRW, maintaining a 'Hold' investment rating, as it expects the company's earnings improvement to begin in the second half of the year.

Lee Seonhwa, a researcher at KB Securities, stated, "While the sales decline of existing titles continues, the lifespan of mobile games is gradually shortening, and expectations for the success of new releases are also diminishing. Although selling off non-gaming subsidiaries and expanding the new game pipeline to strengthen competitiveness in the core gaming business is a positive change, the sale of stakes in profitable subsidiaries has weakened the company's financial strength. Given the intensified market competition and uncertainty regarding the success of new titles, we maintain a cautious outlook."

Kakao Games' fourth-quarter results last year are expected to fall short of market expectations. Lee said, "Kakao Games' consolidated revenue for Q4 is expected to decrease by 15.2% year-on-year to 171.2 billion KRW, with an operating loss of 6.8 billion KRW, turning to a deficit and falling short of the consensus operating loss estimate of 200 million KRW. Mobile revenue is expected to decline by 24.5% year-on-year to 118.7 billion KRW due to the absence of new titles and continued sales decline of existing games. Despite the release of 'POE2,' PC revenue is estimated to drop 29.8% quarter-on-quarter to 24 billion KRW, as Kakao Games only holds domestic publishing rights, limiting its revenue contribution." He added, "Operating expenses are expected to remain similar to the previous quarter without any unusual factors, resulting in an operating loss due to the revenue decline."

With new title momentum concentrated in the second half, a full-scale earnings recovery is expected to begin then. Lee noted, "Kakao Games is preparing to launch 10 new titles this year. In Q1, Valhalla Survival by Lionheart Studio was released on January 21. In Q2, Project C and Guardians Owner are scheduled for launch, followed by Project Q (late Q3) and Chrono Odyssey (year-end) in the second half. Project Q continues the Odin intellectual property (IP), and Chrono Odyssey is Kakao Games' first console title, generating high expectations. Since major new releases are concentrated in the second half, the full-scale earnings improvement is expected to start then."

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