[Click eStock] "NCSoft to Create Stock Rebound Momentum with Lineage W"

KB Securities Report
Target Price Down 17%

[Asia Economy Reporter Minji Lee] KB Securities maintained a buy rating on NCSoft on the 18th, while lowering the target price by 17% to 790,000 KRW.

NCSoft's expected sales for the third quarter are forecasted at 513.4 billion KRW and operating profit at 102.8 billion KRW, down 12% and 52% respectively compared to the same period last year. This is because the sales of major games excluding Lineage M decreased compared to the previous quarter, and Blade & Soul 2 is estimated to have daily sales of about 700 million KRW, falling short of the previous estimate of 3 billion KRW per day. Even considering the effect of Blade & Soul 2's release at the end of August, sales are expected to decline compared to the previous quarter, with sales and operating profit projected to fall short of market expectations by 11% and 26.3%, respectively.

Lineage W, scheduled for release on the 4th of next month, is expected to provide a user experience similar to existing games, while differentiating itself with a global business model (BM) and multiplatform support. The first region release is planned to include major Asian countries such as Korea, Japan, and Taiwan, and pre-registrations have already surpassed 10 million. Additionally, the monthly subscription-type BM like 'Ain Hasad' has been removed, significantly lowering the payment tendency, and by supporting PC and console platforms familiar to Western core gamers, the goal is to attract a broad user base. Lineage W's estimated average daily sales for the fourth quarter are about 2.6 billion KRW.

Researcher Dongryun Lee said, "Since the beginning of the year, criticism over excessive payment inducement has led to a decline in sales, making it difficult to maintain the current BM. The success of Lineage W will be a crucial turning point in determining the company's future direction in terms of expanding sales regions and securing a long-term sustainable revenue model."

KB Securities has lowered NCSoft's operating profit estimates for this year and next year by 24.9% and 23.4%, respectively. This is due to declining sales of core IPs such as Lineage M and Lineage 2M, and Blade & Soul 2's performance falling short of expectations. Researcher Dongryun Lee analyzed, "Even considering the success of Lineage W, a recovery to previous peak stock prices seems difficult, but based on the current stock price, the 2022 price-to-earnings ratio (PER) is 16 times, indicating room for valuation growth ahead of the new release."