From Big Bang and Blackpink to Rookie 'Treasure'... YG's 'Clear Skies' Ahead of Business Normalization

Blackpink's Comeback Next Month... Rookie 'Treasure' Debuts in July
Continued Overseas Popularity Expected Despite No Offline Performances
Controversies Resolved Amid Turmoil and Business Normalization Seen as Positive Factor

[Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] YG Entertainment is expected to see its operating profit grow by 250% compared to last year. Despite the industry-wide inability to hold offline performances, the company is preparing not only existing popular artists like Big Bang and BLACKPINK but also new rookies, alongside growth in the high-margin music streaming sector and business normalization, which are seen as key factors.

On the 31st, Hanwha Investment & Securities forecasted that YG Entertainment would achieve sales of 252 billion KRW and an operating profit of 5 billion KRW this year. While sales are expected to decrease by 4.5% compared to last year, operating profit is projected to grow by 250%.

The main reason behind this performance is the company’s acquisition of highly influential artists. Ji Inhae, a researcher at Hanwha Investment & Securities, explained, "If the investment point for entertainment stocks is momentum from rookie groups and other nationalities rather than domestic and Japanese markets, YG Entertainment is the strongest. The guarantee per concert outside Japan is rapidly increasing, and YG is the agency of BLACKPINK, who have the greatest influence in Southeast Asia, and Big Bang, who have a fandom large enough to headline the final stage at the US Coachella."

Even before the 2016 THAAD conflict between China and South Korea escalated, YG Entertainment had the highest revenue in the Greater China region among the three major entertainment companies including SM Entertainment and JYP Entertainment. It is also notable that Tencent, one of China’s largest companies, still holds shares in YG Entertainment. Additionally, while the return of major artists through offline performances was delayed in the first half of the year, BLACKPINK’s comeback next month and the debut of rookie group TREASURE in July are on the horizon.

Business normalization is also a positive factor. Researcher Ji said, "After a turbulent period including the Burning Sun gate scandal and large losses in YG Plus’s new business, YG Entertainment has been withdrawing from deficit new businesses such as food service, sports, and cosmetics since the end of last year, and is normalizing the increased selling and administrative expenses. Furthermore, the high-margin music streaming sector is growing, and the potential for expanding overseas fandom remains valid."

For these reasons, Hanwha Investment & Securities maintained a 'Buy' investment rating and a target price of 40,000 KRW for YG Entertainment. The closing price on the previous trading day was 29,600 KRW.