Studio Dragon, Consecutive Upgrades in 'Performance and Stock Price'

[Asia Economy Reporter Lim Jeong-su] The earnings and stock price forecasts for Studio Dragon, a domestic drama production company, have been consecutively revised upward. Analysts believe that a favorable business environment will be created due to the diversification of drama sales channels and the competition among global over-the-top (OTT) video services to secure content.

In a recent report, Samsung Securities projected that Studio Dragon's operating profit margin this year will approach 12%, which is 1.2 percentage points higher than last year's estimate. At the same time, the target stock price was raised by 17.2%, from 105,800 KRW to 124,000 KRW.

Samsung Securities analyst Kwak Ho-in stated, "The entry of global OTTs into Korea is increasing, and domestic OTTs are also expanding their original content," adding, "The content supply war will continue to intensify." He further predicted, "As drama producers diversify their content sales channels and sales prices increase, both scale growth and profitability improvement effects will appear simultaneously."

For the fourth quarter of last year, it was estimated that sales reached 112.8 billion KRW and operating profit was 9.5 billion KRW. It was explained that dramas such as 'The Uncanny Counter', 'Mr. Queen', and 'Record of Youth' received positive responses in the market, and recognizing revenue related to the Netflix original blockbuster 'Sweet Home' positively impacted the performance.

Meritz Securities also significantly raised Studio Dragon's stock price forecast from 87,000 KRW to 120,000 KRW. Their forecast for the fourth quarter of last year anticipated sales to increase by 24.6% year-on-year to 121.4 billion KRW, with operating profit turning positive at 10.2 billion KRW.

Researcher Lee Hyo-jin of Meritz Securities explained, "Reflecting the sharp rise in the stock price of Netflix, a comparable company used for corporate valuation, the enterprise value to EBITDA (EV/EBITDA) multiple applied to Studio Dragon was raised from 16 times to 24 times." She also added, "As a supplier-favorable market environment has been established, the 10% discount rate previously applied to the valuation was removed."

However, she noted, "There is no standout blockbuster like 'The King', which played a significant role in last year's performance," and emphasized, "It is necessary to observe how the absence of a blockbuster will be overcome."