Studio Dragon Expected to Meet Market Expectations for Q1 Earnings

[Asia Economy Reporter Ji-hwan Park] Meritz Securities maintained a buy rating on Studio Dragon on the 12th, stating that its first-quarter earnings met market expectations. However, the target price was lowered from the previous 110,000 KRW to 96,000 KRW.

Researcher Hyo-jin Lee of Meritz Securities said, "Studio Dragon's first-quarter sales this year were 103.6 billion KRW, down 7.3% year-on-year, and operating profit increased by 3.2% to 11.3 billion KRW, which aligns with market expectations."

Due to the Netflix memorandum of understanding (MOU), some works, although not tentpole projects, are expected to secure higher licensing fees relative to production costs compared to before, resulting in overseas licensing revenue of 38 billion KRW.

Depreciation is expected to be 19.5 billion KRW, down 8 billion KRW from the previous quarter, considering the reduction in remaining intangible assets due to large-scale amortization in the fourth quarter.

However, advertising profits and losses of broadcasters, which cover more than 60% of production costs, have significantly deteriorated, increasing the likelihood that broadcasters will share part of their reduced operating profits with the company in the second half of the year.

Researcher Hyo-jin Lee stated, "Due to the changed upstream environment (broadcasters), earnings visibility has declined compared to the past," adding, "The premium compared to the market has widened, and we judge that the price attractiveness has also decreased in this range."