[Click eStock] Studio Dragon Widens Gap as Clear No. 1

Intensifying OTT IP Battle Among Netflix, Disney, Apple, Coupang, etc.
K-Content Market Booming... Growth Expected in Both Quality and Quantity

[Asia Economy Reporter Minwoo Lee] Studio Dragon, the largest production company in Korea, is expected to be the biggest beneficiary of the booming K-content production market. It is anticipated that production cost efficiency will improve through diversification of production platforms, leading not only to quantitative growth but also qualitative improvements.

On the 16th, Kiwoom Securities forecast that Studio Dragon will record consolidated sales of 124 billion KRW and operating profit of 15.3 billion KRW in the first quarter of this year. Compared to the same period last year, sales are expected to increase by 3.1% and operating profit by 31.3%, surpassing market consensus estimates.

Namsoo Lee, a researcher at Kiwoom Securities, stated, "Netflix simultaneously aired 'Vincenzo' and 'Navillera,' and released the Netflix original 'Love Alarm 2,' demonstrating expansion potential." He added, "Studio Dragon’s captive (intra-affiliate) broadcasting scheduling has stabilized, so scheduling revenue is expected to remain steady. The content production segment for Netflix, which is increasing its production budget, will lead to outperforming market returns." Furthermore, he analyzed that the reflection of production costs and amortization will become more stable as Netflix’s simultaneous airing and original schedules become denser, reducing cost volatility due to accelerated amortization.

It is also expected that Studio Dragon will directly benefit from the booming K-content market, where fierce competition is underway among overseas online video services (OTT) such as Disney Plus and Apple TV Plus, which are scheduled to launch domestically, to secure major intellectual property (IP). Lee explained, "Netflix has announced and is pushing forward with an investment of 550 billion KRW this year, exceeding 70% of its total investment over the past five years, to maintain its leadership in securing IP in the domestic drama market." He further explained, "The annual content investment by domestic and international OTTs, including Netflix, is estimated at 1 trillion KRW. Along with this, the increase in supply volume due to production costs from existing broadcasters and film production industries, as well as the expansion of services by new entrants such as Disney Plus and media non-core sectors like Coupang, is a highly likely scenario."

Against this backdrop, Kiwoom Securities maintained a 'Buy' rating on Studio Dragon and raised the target stock price to 140,000 KRW. The closing price the previous day was 105,000 KRW. Researcher Lee forecasted, "Not only will there be scale expansion this year, but qualitative improvements such as an increase in operating profit margin will also appear. Planning production of about 32 titles this year will bring scale expansion, and with the addition of TVING, diversification of production types will occur, leading to efficiency through selection and concentration of production costs."