NCSoft, Second Quarter a Breather... Market Focus Shifts to Fourth Quarter

[Asia Economy Reporter Song Hwajeong] Although NCSoft posted second-quarter results below expectations this year, optimism for the second half remains valid.

According to the Financial Supervisory Service's electronic disclosure system on the 15th, NCSoft recorded an operating profit of 208.9 billion KRW on a consolidated basis in the second quarter. This represents a 61.49% increase compared to the same period last year. Revenue rose 31.11% to 538.567 billion KRW, and net profit increased 35.54% to 158.386 billion KRW. While these figures show significant growth year-over-year, they all declined compared to the previous quarter. Revenue decreased by 26.3%, operating profit by 13.4%, and net profit by 18.9% quarter-over-quarter.

Lee Moonjong, a researcher at Shinhan Financial Investment, explained, "NCSoft's second-quarter revenue and operating profit fell short of consensus estimates (revenue 627.8 billion KRW, operating profit 239 billion KRW). Sales declined as item promotion intensity was adjusted ahead of updates for Lineage M and Lineage 2M." The daily sales for Lineage M and Lineage 2M in the second quarter were 1.76 billion KRW and 2.17 billion KRW respectively, down 24.6% and 42.2% from the previous quarter.

There is a forecast that a turnaround is possible in the second half due to expectations for new releases. Jung Hoyoon, a researcher at Korea Investment & Securities, said, "Although second-quarter results were somewhat sluggish, various reversals can be expected in the second half. After the addition of new classes and new servers in early July for the flagship lineup Lineage M, revenue and traffic quickly rebounded, and it is understood that the game continues to maintain strong popularity." It is also analyzed that Lineage 2M's user decline stopped from July, and with the upcoming siege war update, a rebound in revenue can be expected.

Expectations are high for Blade & Soul 2, which is scheduled to be released within the year. Lee Dongryun, a researcher at KB Securities, said, "Blade & Soul 2 (hereafter BnS2), the most anticipated title this year, is highly likely to be released within the year, with the timing expected in November. Considering that Lineage M and Lineage 2M were launched after 70 and 83 days of pre-registration respectively, the new title momentum will be fully highlighted through a new release event and the start of pre-registration around September."

Performance is expected to increase significantly in the fourth quarter. Sung Jonghwa, a researcher at eBest Investment & Securities, explained, "Both revenue and operating profit will rebound sharply in the fourth quarter. Not only are there major release schedules such as BnS2 in Korea and Lineage 2M in Taiwan, but also a promotional event commemorating the first anniversary of Lineage 2M's Korean release is planned. In addition, major PC games such as Lineage, Lineage 2, Aion, and Blade & Soul have large-scale content update schedules prepared."

Reflecting these expectations for the second half, securities firms have consecutively raised their target prices for NCSoft. eBest Investment & Securities raised its target from 1.1 million KRW to 1.25 million KRW, a 14% increase, Shinhan Financial Investment raised it by 5% to 1.05 million KRW, and Kiwoom Securities also set it at 1.1 million KRW.