[Click eStock] Studio Dragon, Expectation for China Content Opening 'Target Price Up'

[Asia Economy Reporter Lee Seon-ae] On the 24th, KB Securities announced that it is raising the target price of Studio Dragon to 127,000 KRW, an increase of 5.8%. The basis for the target price revision is the continued rise in library ASP due to intensified OTT competition and top-line growth from an increase in the number of productions.

For 2021, the company is expected to continue its growth trend with sales of 621.3 billion KRW (+18.2% YoY) and operating profit of 7.73 billion KRW (+57.2% YoY). Similar to 2020, the strong demand for content will sustain robust sales revenue, and programming revenue is expected to re-enter a growth phase due to recovery in the advertising market, which was sluggish due to COVID-19, and an increase in the number of productions.

The average sales revenue per work, which has shown an upward trend annually (2019 +10% YoY, 2020 +8% YoY), is projected to reach 1.74 billion KRW in 2021 (+12% YoY) as global competition among global OTT platforms intensifies. Despite price increases, sales volume is also expected to continue rising due to library accumulation, with sales revenue forecasted at 344.1 billion KRW (+23.0% YoY) in 2021. The programming sector, which saw a decrease in the number of productions (-1 work YoY, total 27 works) due to COVID-19, is expected to recover its production growth trend and, with expanded production scale, escape the previous year's negative growth (-5.6% YoY) to record 225.8 billion KRW (+14.6% YoY) in 2021, continuing its growth trajectory.

Researcher Lee Dong-ryun of KB Securities analyzed, "With the official partnership between KBS and CCTV on the 22nd, the possibility of opening Chinese cultural content has increased further," adding, "Although the domestic broadcast of the company's content in China has been suspended since Antourage in November 2016, during the THAAD restrictions, demand for Korean content in China continued indirectly through sales of rights to Chinese OTTs and original production. Therefore, opening the Chinese market could lead to sales growth expansion based on a rich library."