Securities firms are rapidly lowering their view of major domestic entertainment companies. Not only companies with deteriorated performance prospects, but also companies with record-high performance expectations could not avoid falling their target stock prices. Analysts say that the growth premium, which was applied to the entire enterprise industry, is decreasing beyond the adjustment of individual companies’ profit estimates.
According to FnGuide on the 19th, there were a total of 12 reports of securities companies that lowered their target stock prices of four entertainment companies, SM, JYP Ent, YG Entertainment, and Hive, from the 13th to the day. SM and JYP Ent had the largest number of cases with four each, followed by Hive and YG Entertainment with two cases each. The average downward price target for these reports reached 13.45%.
The burden pointed out by the stock market is more cost than sales decline. SM lowered its target stock price by 15.77% from an average of 128,750 won to 108,500 won by four companies, including KB Securities. While album sales fell short of expectations, concerns that the expansion of high-year artist activities could lead to higher settlement rates and increased North American promotions and new investment costs, outpacing external growth. JYP Ent also lowered its target stock price by 10.5% on average. Eugene Investment & Securities predicted that JYP Ent’s operating profit in the second quarter will be only KRW 38.5 billion, down 27.3% year-on-year. Lee Hyun-ji, a researcher at Eugene Investment & Securities, said, “The cost burden will increase as the album sales of the artists who came back are not high,” adding, “Twice’s renewal season and Stray Kids’ enlistment in the military should be approached to prove their performance growth.”
YG Entertainment had the biggest drop. Samsung Securities and Eugene Investment & Securities lowered their target price by 16.66 percent on average. Sales have increased due to the expansion of Baby Monster and Treasure activities, but it is judged that time is needed to turn artist growth into profits as production costs and promotion costs are reflected first.
Companies with good performance were no exception. Hive is expected to have sales of KRW 1.2698 trillion (80% year-on-year) and operating profit of KRW 146.1 billion (121.6%) in the second quarter due to the effect of the BTS (BTS) World Tour. Nevertheless, Eugene Investment & Securities and SK Securities lowered their target stock prices by 11.51 percent on average. This is not a matter of profit forecast, but a result of lowering the price-to-earnings ratio (PER) itself, which is applied to the enterprise industry. In other words, the record-high performance forecast alone did not prevent the overall decline in the valuation of the industry.
The fact that the newly proposed target stock price is significantly below the existing consensus raises the possibility of further downward. SM was more than 20% lower than consensus and YG Entertainment and JYP Ent were more than 10% lower for the lowest target stock price by securities firm.
However, some say that the lowered valuation could be a factor in increasing the rebound in stock prices if the performance is confirmed. The key is to secure the fandom of new intellectual property rights (IP) and whether the sales of performances and products by large artists lead to actual profits. Choi Min-ha, a researcher at Samsung Securities, said, “The stock price trend of enterprises in the first half of this year was disappointing, but the industrial performance steadily expanded,” adding, “The growth of low-year artists and the expansion of the profit base of top tier artists are simultaneously appearing.”
[Reporter Kim Jeongseok]
‘ The preceding article may include information circulated by third parties ’
‘ Some details of this article were extracted from the following source www.mk.co.kr ’
