[Click eStock] YG Entertainment, High Growth Potential of Treasure... "Increase Weight"

Hana Financial Investment Report
"Treasure Holds Potential Beyond Twice"

[Asia Economy Reporter Minji Lee] Hana Financial Investment maintained a buy rating and a target price of 60,000 KRW for YG Entertainment (YG Entertainment) on the 1st, judging that Treasure, who is making a comeback in September, has the potential to surpass Twice.

Treasure's debut initial sales reached 170,000 copies, similar to competing groups (TXT, Stray Kids) that debuted 1-2 years earlier. It is expected that Treasure's September comeback will confirm whether their 2021 album can grow to 1 million copies. Considering the member composition and fandoms in China and Japan, not only management but also high-margin sales such as digital music, physical albums, and merchandise are expected to grow significantly over the next few years, contributing to profit growth as early as the second year.

YG Entertainment recorded its highest-ever operating profit (separate basis) in 2016, when Big Bang peaked with concerts in Japan and China, posting an operating profit of 29.3 billion KRW at that time. JYP's operating profit last year was 43.5 billion KRW, with Twice significantly increasing high-margin revenues from Japanese dome tours, albums, digital music, merchandise, and YouTube despite being in their fifth year. Kihoon Lee, a researcher at Hana Financial Investment, explained, "In terms of explaining corporate value, Twice is a much better group than Big Bang," adding, "Treasure has the potential to surpass Twice, which means they can significantly increase high-margin sales."

The music industry is currently enjoying a boom. Groups that debuted 2-5 years ago during the high growth of overseas digital music sales in 2017-2018 have achieved high results in the US and global markets, leading to high growth in album sales now in their 5-8 years. BTS is also growing twofold annually, and Blackpink, enjoying the steepest growth since BTS, is expected to set historic records with the release of their full-length album in October.

Researcher Kihoon Lee advised, "In this situation, Treasure has confirmed early indicators that they can reach at least Big Bang-level profits," and recommended, "At this point, rather than discussing overvaluation, it is appropriate to hold or continuously increase the weighting."