[Click e-Stock] "HYBE Reflects Large-Scale Costs Ahead of BTS Return... Target Price Maintained"

On November 11, Hana Securities maintained its "Buy" investment rating and target price of 400,000 won for HYBE, stating that "it will be necessary to demonstrate a sharp improvement in performance next year when BTS returns as a full group."

On this day, Lee Kihun, a researcher at Hana Securities, said, "Due to the reflection of large-scale investment costs this year, performance is expected to remain sluggish through the fourth quarter."

HYBE's third-quarter revenue was 727.2 billion won, up 38% year-on-year, but its operating loss reached 42.2 billion won, falling significantly short of the market consensus of 36.3 billion won. Lee analyzed, "One-off costs amounted to about 87 billion won, which lowered the operating profit margin (OPM) by about 12 percentage points. About half of these costs were due to restructuring the North American business and the debut expenses for new global groups," adding, "Compared to previous forecasts, one-off costs increased by more than 50 billion won."

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In the fourth quarter, comebacks are scheduled for TXT's Yeonjun, Boynextdoor, TWS, &TEAM, Le Sserafim, and ILLIT, while Seventeen's Japan Dome tour and Cat's Eye's first North American tour, among others, will bring the total tour audience to over 1.1 million. However, as the final production costs for the Latin boy group whose audition ended last month and marketing expenses for the game 'Architect' are reflected, operating profit is expected to reach 37.4 billion won (market consensus: 58.4 billion won).

Next year, the company plans to debut one male and one female group in the United States. Since the girl group will debut through a Japanese online video service (OTT), cost concerns are expected to be limited. In gaming, the company has decided to streamline its uncertain publishing portfolio and reallocate resources to internal development projects.

Lee stated, "We are maintaining our operating margin forecast at 13% for next year (3% for 2025). We recommend aggressive buying on every correction before the BTS tour. This is our top pick with strong conviction."

He added, "While there will naturally be concerns about costs next year, Cat's Eye, among the new global groups, climbed to No. 37 on the Billboard HOT100 within two years of debut and was nominated in two Grammy Award categories, achieving unprecedented monetization. Cortis also has cumulative debut album sales of 960,000 units and is certain to surpass 1 million units within the year, and with five songs already released, a tour is feasible within two years."

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