[Click eStock] “SM, Solid Artist Lineup”

Kiwoom Securities "SM Target Price Raised from 44,000 KRW to 78,000 KRW"
Growth in Album and Music Streaming Sectors... Multiple Intellectual Properties as Strengths

(Provided by Kiwoom Securities)

[Asia Economy Reporter Gong Byung-sun] SM's second-quarter performance this year is expected to exceed market consensus, driven by strong album and digital music sales. The solid artist lineup is anticipated to bring about a rapid recovery going forward.

On the 20th, Kiwoom Securities estimated SM's second-quarter revenue at 187.5 billion KRW, a 38% increase compared to the same period last year, and operating profit at 20.6 billion KRW, up 56.7% year-over-year. These figures surpass the consensus estimates of 175.1 billion KRW and 19.1 billion KRW by 7.08% and 7.85%, respectively.

The better-than-expected results appear to be due to growth in the album and digital music sectors. According to Gaon Chart's second-quarter data, NCT Dream and EXO's new album sales reached 2.05 million and 1.22 million copies respectively, surpassing the million-seller mark. Simultaneous physical album sales also occurred, with NCT Dream selling 3.16 million copies including repackages, and EXO selling 1.35 million copies. Namsoo Lee, a researcher at Kiwoom Securities, explained, "With the recovery of the domestic advertising market, SM C&C's performance improvement will also be supported. Although the Japan market, concerts, and drama sectors remain sluggish, they are expected to recover quickly once global activities resume."

The solid artist lineup is expected to contribute to a swift performance recovery in the future. Lee said, "The entertainment business primarily starts with the popular appeal of albums and digital music released by artists, then expands to secondary concerts and tertiary portrait and merchandise planning (MD). The artist lineup, including NCT, which has grown into a global idol, as well as EXO, Super Junior, and TVXQ, is stronger than domestic K-pop competitors." Especially as global album sales expand, interest in digital music and physical albums is increasing, so multiple intellectual properties (IP) are expected to act as strengths.

Accordingly, Kiwoom Securities maintained a 'Buy' rating on SM. The target price was raised from 44,000 KRW to 78,000 KRW. The previous day's closing price was 62,300 KRW.