[Click eStock] "NEW, Expected Expansion of Sales to OTT... Target Price 14,000 Won"

Heungkuk Securities Report

[Asia Economy Reporter Minji Lee] Heungkuk Securities on the 1st gave a buy rating and a target price of 14,000 KRW for NEW, based on the expectation that it will benefit from sales of movies and dramas for online video streaming services (OTT).

Contrary to market opinions that the film industry has reached its end due to theater shutdowns, OTTs are expected to maintain a tight supply of unreleased and new films this year. Netflix also plans to release at least one new film every week this year. Due to the industry changes led by OTTs, the proportion of overseas rights sales in NEW's film business revenue is expected to increase from 6% in 2019 to 27% last year and 45% this year.

Researcher Taena Cho of Heungkuk Securities said, "The film investment and distribution sector is transitioning from a hit-driven industry to a safe margin business," adding, "Since the sale of 'Call' to Netflix in the fourth quarter of last year, an increase in overseas rights sales to OTTs is expected."

Sales to OTTs are also anticipated in the drama sector. The largest work among the product lineup is 'Moving,' based on the original work by writer Kang Full, with a production cost of about 50 billion KRW, making it a work that naturally expects sales to OTTs. In addition to 'Moving,' 'Melting' and 'The Devil Judge' are scheduled to air on tvN, with production costs of around 15 billion KRW each, which is expected to positively impact performance improvement.

Accordingly, the company's sales this year are expected to grow 9% year-on-year to 140.3 billion KRW. Sales of rights to OTT platforms are expected to rise significantly. Operating profit is forecasted to reach 14 billion KRW, a 288% increase from last year. This is because a reduction in losses is expected in the film investment and distribution division on a separate basis, and the performance of the production line subsidiary Studio&New and the sales line Content Panda is expected to improve significantly.

Researcher Taena Cho explained, "For the stock price to grow further, the valuation multiple needs to increase through collaborations with global OTTs."