[Click eStock] "Studio Dragon, Sales Growth Expected on China's Reopening Possibility"

Daishin Securities Issues 'Buy' Investment Opinion and Sets Target Price at 115,000 Won... Closing Price on 25th at 80,300 Won

[Asia Economy Reporter Geum Bo-ryeong] Studio Dragon is expected to see an increase in sales revenue due to the potential reopening of the Chinese market.

According to Daishin Securities on the 26th, Studio Dragon recorded sales to China in the third quarter of this year. After selling two older works, it is estimated that about 6 billion KRW, part of the sales revenue, was recognized as sales and profit.

Studio Dragon is currently planning and producing two original contents for Chinese online video services (OTT), aiming for broadcast in the first half of next year. In June, "Convenience Store Saetbyeol" and "Would You Like to Have Dinner Together?" were simultaneously aired on iQIYI's global site, one of the top three OTT platforms in China.

Kim Hoe-jae, a researcher at Daishin Securities, explained, "The Chinese market is important because Netflix has not entered China, so dramas simultaneously aired on tvN and Netflix can be additionally sold to China." He added, "Since Studio Dragon produces about 30 dramas out of an annual production capacity of 50, it can sign simultaneous broadcast contracts not only with Chinese OTTs but also with Disney+ and HBO Max, which are likely to enter Korea soon, for more than 23 dramas not aired on Netflix. Therefore, Studio Dragon's sales revenue is expected to increase significantly." Studio Dragon has contracts to simultaneously air about seven dramas annually on tvN and Netflix (one hour after tvN broadcast), receiving about 60-70% of the estimated production cost from Netflix, according to Daishin Securities.

Daishin Securities forecasts that reflecting the increase in production volume and sales revenue, Studio Dragon's average annual sales and operating profit will grow by 8.2% and 38.5%, respectively, until 2024. Researcher Kim said, "Although the exact sales amount for the works recognized as sales to China this time is unknown, considering that Studio Dragon's sales revenue per work (annual total sales divided by the number of libraries at year-end) is in the mid to high 1 billion KRW range, it is judged to have been sold at a good price." He added, "Even if Studio Dragon receives only 1 billion KRW per work for its library of about 160 works, sales of 160 billion KRW would be generated."

Daishin Securities gave Studio Dragon a 'Buy' investment rating with a target price of 115,000 KRW. The closing price on the 25th was 80,300 KRW.