[Click eStock] "NCSoft, Focus on New Release Early Next Year... Buy Approach Valid"

[Asia Economy Reporter Oh Ju-yeon] Hanwha Investment & Securities analyzed that NCSoft's third-quarter earnings this year rebounded significantly more than expected, surpassing consensus, and the scheduled new releases in the first quarter of next year are expected to be launched as planned, making it a valid period for a buy approach.

NCSoft recorded sales of 585.2 billion KRW and operating profit of 217.7 billion KRW in the third quarter of this year, exceeding market consensus.

Hanwha Investment & Securities explained that the reason NCSoft's performance exceeded expectations was "Lineage M saw a larger-than-expected sales increase due to the 3rd anniversary event effect, and PC Lineage also showed a significant sales rebound." The average daily sales of Lineage M and Lineage 2M were 2.7 billion KRW and 1.6 billion KRW respectively, and it is encouraging that Lineage M, which was released three years ago, recorded sales at the highest level since 2018. PC Lineage sales also increased by 46% compared to the previous quarter due to a large influx of dormant users, and marketing expenses rose 130% quarter-on-quarter to 29.7 billion KRW due to promotions related to a large-scale update.

NCSoft's sales and operating profit for the fourth quarter of this year are forecasted to be 508.2 billion KRW and 166.3 billion KRW, respectively.

Researcher Kim So-hye of Hanwha Investment & Securities said, "A slight decrease in sales is expected due to strong sales of mobile games from last quarter's update," but added, "The new release schedule, which was the biggest concern in the market recently, is expected to proceed as planned."

NCSoft is scheduled to launch Blade & Soul 2 and Lineage 2M in Taiwan in the first quarter of next year.

Researcher Kim said, "Competitors' hit games are also seeing a decline in initial launch effects, and since there will be no major MMORPG new releases for the time being, the possibility of Blade & Soul 2's success remains high," adding, "The domestic release of Aion 2 and Lineage TL is still scheduled for the second half of next year, so the stock price is expected to continue rising with the new releases."

Accordingly, the investment opinion of 'Buy' and the target price of 1.1 million KRW for NCSoft were both maintained.

Researcher Kim emphasized, "The recent stock price has shown weakness due to concerns over delays in new releases and sales decline of Lineage 2M, resulting in a price-to-earnings ratio (PER) of only 17 times based on next year's expected earnings," and added, "NCSoft's valuation has never fallen below 17 times, and with a 51.5% increase in operating profit expected next year due to the release of major MMORPG titles, the stock price is expected to shift to a stable upward trend."