[Click eStock] "All We Have Is Content"... Studio Dragon Begins Full-Scale Growth

Proving the Possibility of 10 Billion KRW Quarterly Operating Profit
Growth Rate Increases with Expansion into Overseas Platforms like Netflix and Disney+

[Asia Economy Reporter Minwoo Lee] Studio Dragon has consistently maintained quarterly operating profits of 10 billion KRW. With an increasing trend in new content production and expansion into various platforms such as Netflix, analysts believe its future growth potential is very high.

On the 25th, Daishin Securities issued a 'Buy' rating on Studio Dragon with a target price of 115,000 KRW, based on this assessment. The previous trading day's closing price was 77,500 KRW.

Through the recent Q1 earnings announcement, Studio Dragon was recognized for securing a stable earnings structure. Revenue reached 120.3 billion KRW and operating profit was 11.6 billion KRW, up 8% and 5% respectively compared to the same period last year. Despite highly uncertain performance conditions, this proves that Studio Dragon can achieve at least 10 billion KRW in operating profit each quarter, continuing the trend from Q1 to Q3 last year.

Researcher Kim Hoejae of Daishin Investment & Securities explained, "Studio Dragon's revenue consists of scheduling revenue (broadcasting rights fees from CJ ENM, estimated to be about 50% of production costs), sales revenue (licensing rights sold to platforms other than CJ ENM, such as simultaneous broadcasts on Netflix), and PPL (product placement and advertising). Since production costs vary greatly by work, scheduling is confirmed close to the broadcast date, and sales occur before and after airing to numerous domestic and international platforms, there is significant uncertainty. However, this earnings report positively indicates the minimum profit that about seven productions can generate."

The annual number of dramas produced by Studio Dragon has steadily increased from 19 in 2016 to 28 last year, and is expected to reach 33 in 2020. Notably, among the dramas produced this year, besides 28 for CJ ENM, there are 2 for terrestrial broadcasters and 3 Netflix originals. This will bring the total catalog to approximately 160 titles, including existing works. Studio Dragon secured simultaneous broadcast contracts with Netflix for about seven titles annually and increased the average sales rate by 10 percentage points. Production margins for 2 to 3 Netflix original contents per year were also raised by about 10 percentage points.

Analysts also see strong growth drivers in existing content. Since the 2016 drama 'Dokkaebi' was recently sold to Netflix, potential demand for the existing catalog of 160 titles is expected. Researcher Kim stated, "With Disney Plus, HBO Max, and others expanding globally and potentially investing in Korean content like Netflix, Studio Dragon's growth is just beginning."