[Click eStock] “Studio Dragon, Record-High Programming Expected Next Year”

Recent Stock Slump Due to Lack of Blockbusters... Sufficient Works Awaiting Broadcast
Daishin Securities "Maintains Studio Dragon Target Price at 130,000 Won"

[Asia Economy Reporter Gong Byung-sun] There are projections that Studio Dragon's third-quarter earnings this year will fall slightly short of market expectations (consensus). However, if programming normalizes next year and deferred works are scheduled, earnings are expected to recover.

On the 7th, Daishin Securities estimated Studio Dragon's Q3 sales at 120 billion KRW, an 8% increase compared to the same period last year, and operating profit at 14.6 billion KRW, a 9% decrease over the same period. This falls short of the sales and operating profit consensus of 136 billion KRW and 17 billion KRW by 11.76% and 14.12%, respectively.

The absence of blockbuster productions is expected to negatively impact earnings. Although the number of drama episodes in Q3 increased by 30 from the previous quarter to 93 episodes, the lack of major productions failed to generate buzz. Large-scale works such as "After School War Activities," "Island," "Twilight," and originals for global OTT platforms Netflix and China's iQIYI have been postponed to next year. The annual number of productions also decreased to 28, below the forecasted 32.

(Provided by Daishin Securities)

However, if programming on OCN normalizes next year and deferred works are aired, it is expected to achieve the highest number of productions ever. Daishin Securities estimates Studio Dragon's number of productions next year to increase by 9 from the previous year to 37. Additionally, there is a possibility of providing original content to Disney's OTT platform Disney Plus, which will launch services domestically in November.

Daishin Securities' analysis indicates that recent adjustments tend to be influenced by the buzz around major works. Kim Hoe-jae, a researcher at Daishin Securities, explained, "The recent rise in content industry stock prices is due to the success of Netflix originals 'D.P.' and 'Squid Game.' Studio Dragon's works have lacked blockbusters and buzz since 'Vincenzo,' leading to stock price adjustments."

He also emphasized, "There are sufficient works waiting to be aired. Normalization of production and broadcasting next year will lead to earnings improvement, so the current stock price weakness due to short-term ratings and lack of buzz is an active buying opportunity."

Accordingly, Daishin Securities maintained its investment opinion of "Buy" and a target stock price of 130,000 KRW for Studio Dragon. The closing price on the previous day was 91,300 KRW.