NCSoft, Target Price Raised by Securities Firms Despite Bear Market

[Asia Economy Reporter Jang Hyowon] Despite the overall stock market struggling due to the novel coronavirus infection (COVID-19) crisis, the securities industry is raising the target price for NCSoft.

On the 28th, according to the financial investment industry, Hi Investment & Securities and Cape Investment & Securities raised NCSoft's target price to 850,000 KRW and 750,000 KRW respectively. These are 36.6% and 20.6% higher than the previous day's closing price of 622,000 KRW.

Although the KOSPI as a whole has been depressed due to COVID-19, NCSoft's stock price was predicted to rise. The reason securities firms forecast NCSoft's increase is the expectation of continued solid earnings growth.

According to financial information provider FnGuide, the average (consensus) forecast for NCSoft's Q1 sales and operating profit this year are 704.6 billion KRW and 286 billion KRW, respectively, expected to increase by 96.4% and 259.8% compared to the same period last year.

Lee Kyung-il, a researcher at Cape Investment & Securities, analyzed, "While Lineage M's sales remain steady, the full reflection of Lineage 2M's sales will cause mobile sales in Q1 to surge by 165%, driving profit growth," adding, "It is also encouraging that they maintain a high daily sales level due to differentiated MMORPG operational capabilities."

Additionally, the recent decrease in outdoor activities due to 'social distancing' has relatively increased the usage of online content such as games, which is favorable for NCSoft. Moreover, even if a recession causes consumers to tighten their spending and NCSoft's sales decline, it is evaluated that the company can sufficiently overcome this due to abundant liquidity.

At the end of last year, NCSoft's cash equivalents on a separate basis were about 1.6 trillion KRW, holding roughly six times more cash than total borrowings of 280 billion KRW. There is no deterioration in performance, and it is expected to continue stable operating cash flow exceeding 400 billion KRW this year as well.

Kim Minjung, a researcher at Hi Investment & Securities, stated, "Lineage games are paid mainly by loyal users, and the proportion of users with relatively strong economic power and consumption ability is high, so the impact of reduced payment ability due to COVID-19 is limited," and predicted, "Even if the COVID-19 crisis prolongs, stable sales will be maintained."