[Click eStock] "YG, Shedding Unprofitable Businesses, Expects Synergy with Weverse↑"

BLACKPINK, TREASURE Anticipated to Join Weverse
TREASURE's Entry into Japan Also a Positive Factor

According to their agency YG Entertainment on the 23rd, BLACKPINK's "DDU-DU DDU-DU" music video surpassed 1.5 billion views on YouTube around 6:30 PM that day. (Provided by YG Entertainment) [Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] YG Entertainment has divested its loss-making cosmetics division by establishing a local joint venture (JV) in China. Alongside this, there are expectations that profit potential will steadily increase through domestic album and digital music distribution collaboration with Big Hit Entertainment.

On the 25th, Hana Financial Investment maintained a 'Buy' rating on YG Entertainment with this background and raised the target price by about 6.7% to 64,000 KRW. The closing price the previous day was 44,700 KRW.

YG Entertainment recorded consolidated sales of 83.4 billion KRW and operating profit of 5.4 billion KRW in the fourth quarter of last year. These figures represent increases of 27.3% and 435.6%, respectively, compared to the same period the previous year, but the operating profit fell short of the market consensus of 6.8 billion KRW. However, on an annual basis, operating profit reached 10.7 billion KRW, a 431% increase year-on-year. This was because the core loss-making cosmetics business of YG Plus (with an annual operating loss of about 3.6 billion KRW) was reflected as a discontinued operation by transferring trademarks and goodwill through the establishment of a local joint venture (JV) in China. Through this, the company completely reorganized business units that had a combined loss of 15 billion KRW, including production, food, and cosmetics.

Album sales included 1.27 million copies for BLACKPINK and 270,000 copies for TREASURE. Sales of BLACKPINK’s online tour merchandise (MD), which was postponed to January this year, were pre-recognized. In the production division, 'Mr. Queen (tvN)' was partially reflected, and 'Joseon Exorcist (SBS)' is expected to be reflected in the first half of the year.

Potential is growing through collaboration with Big Hit. An additional operating profit of 3 to 4 billion KRW annually is expected. Reflecting this, next year’s projected operating profit is estimated to reach 64.9 billion KRW.

Attention is also focused on growth potential from joining Big Hit’s platform, 'Weverse.' Kihoon Lee, a researcher at Hana Financial Investment, said, "Compared to other agencies, fan community services have been weak, and sales from profitable merchandise (MD) and fan clubs have always been a disappointing part, but artists’ sequential entry into Weverse within this year (estimated around mid-year) will proceed." He added, "If the ratio of direct to indirect sales (about 5:5) can be dramatically improved like BTS (Bangtan Sonyeondan), it could lead to significant growth in profits."

TREASURE’s entry into the Japanese market next month is also anticipated. The researcher explained, "Although traveling to the local market is not possible, album sales and other factors will provide a very important momentum to verify profitability over the next 3 to 5 years," adding, "It is worth watching whether they can become the male version of TWICE."