[Click eStock] YG Entertainment, Strong Q3 Earnings..."Increased Expectations for Tour Resumption"

Hana Financial Investment Report

[Asia Economy Reporter Minji Lee] Hana Financial Investment maintained a buy rating on YG Entertainment on the 16th and set a target price of 81,000 KRW. Although growth momentum has somewhat slowed due to regulations originating from China, the company believes it is necessary to raise expectations for the resumption of BLACKPINK's North America and Europe tours, as earnings surprises are expected to continue in the second half of the year and global artists' tours for the first half of next year are being announced one after another.

Third-quarter expected revenue and operating profit are forecasted to be 88.2 billion KRW and 19.3 billion KRW respectively, representing increases of 35% and 400% compared to the same period last year. Operating profit is expected to significantly exceed market expectations (10.5 billion KRW). Album sales are anticipated to reach 950,000 copies, including 800,000 pre-orders for Lisa's solo album.

YG Plus is also expected to achieve its highest-ever operating profit of at least 12 billion KRW, with BTS's July comeback sales reflected through HYBE's domestic album and original distribution. Sales toward Weverse from BLACKPINK will begin at the end of September, and investment valuation gains from Maxst are also expected to be reflected at around 7 billion KRW.

Researcher Kihoon Lee of Hana Financial Investment said, “We have conservatively reflected sales toward Weverse, and related sales are expected to level up through next year's offline tours. Non-operating items will include valuation losses on Tencent Music shares, which are currently at record lows.”

As the resumption of North American and European tours becomes more visible, earnings forecasts are expected to be revised upward again. Justin Bieber announced 52 North American tour dates from February to June 2022, and Billie Eilish announced 54 North American and European tour dates from February to July 2022. In addition, various artists such as Elton John and The Weeknd plan to tour in the first half of next year.

Researcher Lee added, “BLACKPINK showed the greatest benefit as the number one global YouTube subscriber during the COVID-19 period, so offline momentum is expected to be much greater than anticipated. Maximizing MD sales toward Weverse, strong earnings exceeding market expectations are expected to continue, and if activities resume in Japan, a comeback by Big Bang will also become visible.”