[Click e-Stock] "DearU Expected to Improve Earnings... Limited Downside Risk for Share Price"

Fourth-Quarter Earnings Expected to Exceed Consensus

On January 26, IBK Investment & Securities maintained its 'Buy' rating on DearU, stating that the company's fourth-quarter earnings last year are expected to exceed consensus estimates. However, due to an adjustment in earnings forecasts, the target price was lowered from 54,000 won to 52,000 won.

Kim Yoo-hyuk, an analyst at IBK Investment & Securities, estimated, "The company's operating profit for the fourth quarter last year will reach 9.7 billion won, a 100% increase compared to the same period the previous year, surpassing the market expectation of 9 billion won."

Kim explained, "The number of Bubble subscribers in the fourth quarter is expected to decrease to 2.04 million compared to the previous quarter, due to service churn caused by NCT members Doyoung and Jungwoo enlisting for military service. However, revenue likely grew quarter-on-quarter, as a result of increased subscription fees and favorable foreign exchange rates in the fourth quarter."

He continued, "The conversion rate for payment gateway (PG) services also improved by 4 percentage points from the previous quarter to 16%. In addition, advertising and marketing expenses were recognized over the contract period rather than entirely in the fourth quarter, which likely eased the cost burden."

He noted, "As of January, there are a total of 404 artists available on Tencent QQ Music Bubble, and this number is steadily increasing. In December last year, Yueniqi, who has 10 million followers on Weibo, joined the platform, and in January, IPs (intellectual properties) with even larger fandoms are expected to be added."

He added, "DearU's share price has remained weak recently, as the pace of overseas business growth has not met market expectations. However, considering the improvement in earnings due to increased overseas royalties and a higher PG payment conversion rate, we believe the potential for further declines from the current share price is limited."

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