[Click eStock] JYP Entertainment, COVID-19 Impact Inevitable This Year Despite Strong Q1 Performance

[Asia Economy Reporter Minji Lee] Mirae Asset Daewoo maintained a buy rating on JYP Entertainment on the 1st, but lowered the target price by 13% from the previous to 27,000 KRW. Although the first-quarter results exceeded expectations, the outlook is for poor performance this year due to concert suspensions caused by the novel coronavirus disease (COVID-19).

In the first quarter, JYP Entertainment posted sales of 34 billion KRW and operating profit of 13.4 billion KRW, up 29% and 132% respectively from the same period last year. Jeongyeop Park, a researcher at Mirae Asset Daewoo, said, “The improvement in profit margins stood out due to the continuous increase in global digital content sales,” adding, “This was because the sales of Japan-style MD related to TWICE’s concerts were recognized earlier than expected.”

Music album and digital music sales recorded 10.4 billion KRW, a 9% increase year-on-year, as ITZY’s new album sales (134,000 copies) rose about 15% compared to the previous album. Concert sales were 1.3 billion KRW, down 37% from the previous year, reflecting the impact of concert and fan meeting cancellations due to COVID-19 starting in the latter half of the first quarter. Other sales amounted to 17.9 billion KRW, up 135% year-on-year, as sales of MD from TWICE’s arena tour were recognized earlier than planned.

Annual sales are expected to decline 8.7% to 142 billion KRW, and operating profit to decrease 23% to 33.5 billion KRW compared to the same period last year. This is due to the complete suspension of global concert activities caused by COVID-19, which has disrupted artist monetization.

Researcher Jeongyeop Park said, “It is regrettable as the rookie lineups such as Stray Kids and ITZY are entering their monetization phase following the steady growth of TWICE and GOT7,” adding, “Considering that concert sales accounted for 12% of the company’s total over the past five years and that MD sales also contributed significantly to profits, a conservative assumption on performance is necessary.”

The entertainment sector is inevitably facing poor performance without a solution to COVID-19, as the timing of concert resumptions cannot be guaranteed. However, the possibility of improving relations with China and the planned listing of Big Hit Entertainment could buy time to resolve uncertainties. Additionally, it is positive that new content is being released as scheduled despite difficulties in management activities such as concerts. Researcher Jeongyeop Park said, “The company’s strengths, such as steady album releases and IP influence, are being overshadowed by the unfavorable environment,” but added, “Album sales for each lineup are steadily increasing, so even with limited revenue sources, relatively stable performance defense is possible.”