[Click eStock] "Webzen, Stock Price Rally Material Exhausted... Target Price Down 13%"

IBK Investment & Securities Report
The Impact of Litigation Is Limited

[Asia Economy Reporter Minji Lee] IBK Investment & Securities maintained a buy rating on Webzen on the 25th and set a target price of 40,000 KRW, which is 13% lower than the previous target.

Webzen's second-quarter earnings are expected to slow overall as royalty revenue from Tencent's release of "全民奇迹2 (Quanmin Qiji 2)" is reflected, but sales from existing games decline. In the second half of the year, a game based on the MU IP, which was released in China, is planned to be published domestically, but the schedule for additional new game releases in China and domestic publishing of hit games remains undecided. Currently, MU Arch has been launched in five Southeast Asian countries, ranking high in sales, but its contribution to overall performance is expected to be limited.

Seunghoon Lee, a researcher at IBK Investment & Securities, explained, "Webzen has entered a phase where investment sentiment weakens as momentum from new releases and overseas markets diminishes in the second half of the year. Although Tencent's Quanmin Qiji 2 was released in Q2, the decline in sales is progressing faster than expected, accelerating the exhaustion of momentum."

Recently, investment sentiment was significantly dampened by NCSoft filing an intellectual property lawsuit related to R2M, but the impact on earnings is expected to be limited. A criminal investigation is already underway, and this time a civil lawsuit has been added. Previously, NCSoft filed a similar lawsuit in 2016 against It’s Games, the developer of Aden.

Researcher Lee stated, "It is not easy to prove game plagiarism, and both companies are open to conducting a smooth settlement, so the possibility of the dispute escalating into a serious conflict is low." He added, "Since Webzen has high recognition in both Korea and China, its valuation appeal is expected to be highlighted. Investment sentiment will quickly recover once the timing for publishing games based on the MU IP, which was successful in China, becomes clear in the domestic market."