"Entertainment Sector Expected to See Largest Year in History Next Year"

Shinhan Investment Corp. Analyzes the Entertainment Sector

On October 15, Shinhan Investment Corp. maintained its "Overweight" recommendation on the entertainment sector, stating that "next year will be the largest year in K-pop history in terms of scale."

Jin Inhae and Kim Jiyeong, researchers at Shinhan Investment Corp., commented, "Although there is volatility due to concerns over China, revenues from the Greater China region are experiencing high growth even without concerts. In addition, momentum is expected from leveraging super intellectual property (IP), the return of legacy IP, and the growth cycle of merchandise."

Regarding third-quarter results by company, SM Entertainment, YG Entertainment, and JYP Entertainment are expected to meet or exceed consensus estimates, while HYBE and DearU are projected to fall short of expectations.

SM Entertainment's third-quarter operating profit is estimated at 47.9 billion KRW, reflecting album sales of 5.65 million units and 106 concerts. Shinhan Investment Corp. explained, "While the operating profit margin (OPM) is expected to decline slightly due to the increased proportion of concerts, the absolute level of operating profit should be maintained thanks to improved subsidiary performance, cost control, and merchandise sales." The report added, "With the return of legacy IP such as EXO, next year's core IP lineup will be further strengthened."

YG Entertainment is expected to post an operating profit of 35 billion KRW. This is attributed to album sales of 1.17 million units and concert revenue, including BLACKPINK's large-scale world tour. The report stated, "Increased minimum guarantees (MG) for concerts and robust merchandise sales will drive strong results." It continued, "In the fourth quarter, concerts and comebacks by BLACKPINK and BABYMONSTER are anticipated, and next year, the company will mobilize its core IPs for milestones such as its 30th anniversary, BIGBANG's 20th anniversary, and BLACKPINK's 10th anniversary." The target stock price was raised to 120,000 KRW.

JYP Entertainment is projected to achieve an operating profit of 52.2 billion KRW, reflecting album sales of 5.48 million units and 44 concerts based on core IPs such as Stray Kids and TWICE. The report noted, "Excess concert revenue from Live Nation, which expanded from North America in the third quarter to Europe, demonstrates the high recognition of the company's IP. TWICE's global popularity is also expanding, helped by the 'K-Pop Demon Hunters' OST."

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HYBE is expected to record an operating profit of 36.4 billion KRW. The report analyzed, "Sales are solid, with 4.83 million albums sold and 1.5 million concert attendees, but costs continue to rise." This is due to ongoing investments in artists such as TWS and Latin IP. However, the report noted that next year's BTS comeback could drive revenue growth that outpaces cost increases. The researchers emphasized, "This will be the largest world tour in K-pop history in terms of scale and price. As the stock price tends to move ahead of momentum, it is important to be prepared."

DearU is expected to post an operating profit of 9.6 billion KRW. Despite factoring in subscriber growth and price increases, the company is unlikely to meet expectations due to a low conversion rate for payment gateway (PG) transactions. The report mentioned, "If profit contribution from countries such as China is confirmed, a revaluation could be expected."

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