[Click eStock] 2Q Operating Profit Up 46% YoY... Studio Dragon's 'Soaring Flight'

Confirmed Influence in Asian Market Through Netflix
"If Global OTT Interest Concentrates in the Future, It Will Also Succeed on the World Stage"

[Asia Economy Reporter Minwoo Lee] Studio Dragon's growth momentum continues. With the spread of untact (contactless) culture due to the novel coronavirus disease (COVID-19) and drama content holding overwhelming reputation in the Asian region being recognized worldwide, it is analyzed that its market influence will further expand.

On the 14th, Kiwoom Securities forecasted that Studio Dragon will achieve sales of 135 billion KRW and operating profit of 15.8 billion KRW in the second quarter of this year. Compared to the same period last year, sales are expected to increase by 5.3%, and operating profit by 46.1%. Net profit for the same period is estimated to rise by 68.6% to 12.3 billion KRW. Thanks to the high-margin drama lineup through Netflix, the operating profit margin reaches 11.7%, and with the capability to produce over 30 titles annually secured, the growth outlook is bright.

In particular, the three-year supply contract with Netflix for 21 titles starting this year is expected to support quarterly performance stability by increasing the proportion of programs exceeding the previous annual operating profit margin of about 10%. Additionally, momentum for exports to OTT platforms other than Netflix and to China is also increasing, and it is analyzed that among the approximately 30 titles produced annually, the 23 titles not distributed through Netflix will also generate high profits.

Namsoo Lee, a researcher at Kiwoom Securities, explained, "In the second quarter, dramas simultaneously aired on Netflix such as 'Hi Bye, Mama', 'Rugal', 'The King: Eternal Monarch', and 'It's Okay to Not Be Okay' will be broadcast and connected to global sales, once again confirming that the trend of performance growth is ongoing."

The structural change of the market itself was also cited as a positive factor. Considering only the total volume of drama broadcasting channels and broadcast advertising market, the potential of the domestic drama industry is not large, but the number of invested contents per year has significantly increased since Netflix entered the domestic market. The researcher said, "With global companies' OTTs such as Disney Plus (+), Apple TV+, and HBO Max entering the domestic and Asian markets, we have entered a structural 'big cycle' where similar changes can be expected." He added, "'It's Okay to Not Be Okay' ranked number one on Netflix dramas in eight countries including Vietnam, proving its efficiency as a key content for global OTTs' Asia strategy, which will increase Studio Dragon's production influence in the global market."

Against this background, Kiwoom Securities presented Studio Dragon as the top preferred stock in the media sector. The investment opinion 'Buy' and target price of 110,000 KRW were also maintained. The closing price on the previous day was 90,500 KRW.