[Click eStock] "Com2uS Expected to Miss 1Q Earnings Estimates"... Target Price Lowered

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[Asia Economy Reporter Lee Jung-yoon] Korea Investment & Securities downgraded the target price of Com2uS from 220,000 KRW to 170,000 KRW on the 18th, forecasting that the company's first-quarter earnings this year will fall short of consensus estimates. However, the investment rating of "Buy" was maintained.

Com2uS's first-quarter revenue this year is expected to increase by 24.3% year-on-year to 145 billion KRW, while operating profit is estimated to decrease by 66.8% to 5.9 billion KRW, falling 34% short of estimates. Generally, the first quarter is considered an off-season, and the disappearance of the Summoners War event effect from the fourth quarter of last year led to sluggish sales, with revenue declining 5% year-on-year to 81.9 billion KRW. Com2uS's total operating expenses are projected to rise by 40.5% to 139.1 billion KRW. Labor costs are expected to be similar to the previous quarter, but marketing expenses are anticipated to decrease by 19.7% quarter-on-quarter to 11.2 billion KRW due to the absence of new releases and events.

However, expectations for new releases remain strong. Jeong Ho-yoon, a researcher at Korea Investment & Securities, stated, "We still maintain a positive view on Summoners War: Chronicle, scheduled for release in the second half of the year." The introduction of the P2E (Play to Earn) system could positively impact daily sales, and Com2uS's aggressive marketing for the hit game is also expected to create synergy. However, Jeong explained, "As Summoners War ages, its sales are continuously declining, and the increasing burden of fixed costs such as labor costs has reduced profit resilience, which has been a major cause of the recent stock price decline."

Additionally, Jeong said, "Reflecting the delay in the release schedule of Summoners War: Chronicle and the increased cost burden leading to reduced profit resilience, we have lowered this year's net profit forecast by 32.9% compared to the previous estimate," adding, "Due to macroeconomic changes such as rising interest rates, investors are reacting more sensitively to the inherent uncertainties of game stocks, such as new release schedules and hit potential." He added, "However, if the release schedule in the second half of the year is maintained, we continue to hold a positive view on the hit potential."

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