EXO Makes a Comeback, but "Stock Price as Cheap as During the China Ban" [Weekend Money]

"SM Entertainment's Multiple Remains at Only 15 Times Despite Strong Results
Comparable to Levels During China Ban, Incidents, and Weak Yen Periods"

While the KOSPI continues to break all-time highs day after day, entertainment stocks have been underperforming. Despite SM Entertainment posting results that exceeded expectations, its stock price has not reflected this. In the securities industry, analysts point out that SM Entertainment's price-to-earnings ratio (PER) is only 15 times its earnings, even compared to its strong performance, and view this as a "long-term buying opportunity."

Jin Hae Ji, a researcher at Shinhan Investment Corp., stated, "Despite strong results based on intellectual property (IP) performance, SM Entertainment's expected PER for this year remains at 15 times. This 15-fold multiple has been maintained even during past incidents, the China ban on Korean content, and periods of a weak yen, so the downside is limited." This suggests that, given SM Entertainment's performance, the stock price is unlikely to fall further.

SM Entertainment's results for the first quarter of this year exceeded expectations for the fourth consecutive quarter. Its revenue grew by 20.6% year-on-year to 279.1 billion won, and operating profit reached 38.6 billion won.

The strong first-quarter results were driven in part by the return of legacy IP, with EXO's comeback activities making a significant impact. The album sold 1.01 million copies, and several pop-up MD events were held. Concerts involving multiple affiliated IPs also contributed to the results. Both legacy and newer IPs, including Super Junior's "Super Show 10," NCT Dream, aespa, NCT Wish, RIIZE, and Hearts2Hearts, held concerts during the period.

By segment, album sales reached 26.8 billion won, while digital music sales totaled 30.7 billion won. Researcher Ji noted, "Excluding the first quarter of last year, when one-off income from Chinese music contract renewals was unusually high, this is the first time that high-margin digital music sales have surpassed physical album sales," adding, "The company is building mainstream popularity on top of its solid fandom."

Affiliated IPs are also scheduled for active promotions in the second quarter. NCT Wish, aespa, and RIIZE are set to release new albums, and EXO, aespa, and TVXQ have concert tours planned. Researcher Ji commented, "In particular, aespa is growing by continuously expanding its tour scale, and Hearts2Hearts achieved meaningful mainstream music chart results in its second year since debut." He added, "On April 29, the company opened the first official K-pop offline MD store in China, reaffirming its presence in the Chinese market."

Hwang Ji-won, a researcher at iM Investment & Securities, also said, "If the scale of Chinese MD sales exceeds market expectations, there is potential for further upward earnings revision." He added, "At the current stock price, which reflects a 12-month forward PER of 14 times, additional downside is limited." He continued, "If meaningful achievements become visible in key markets such as China and the United States, a valuation rerating will be possible."

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