[Click eStock] "YG Entertainment, Earnings Surprise Again in Q3"

Major Singers' Comebacks and Concerts Resuming in Early Next Year
EBest Investment & Securities Raises YG Entertainment Target Price from 75,000 KRW to 95,000 KRW

[Image source=Yonhap News]

[Asia Economy Reporter Gong Byung-sun] YG Entertainment (YG Entertainment) posted an earnings surprise again in the third quarter of this year. The resumption of concerts and various content businesses are expected to serve as growth drivers going forward.

According to Ebest Investment & Securities on the 15th, YG Entertainment's sales in the third quarter of this year increased by 31% year-on-year to 86 billion KRW, and operating profit rose by 371% during the same period to 17.3 billion KRW. The operating profit exceeded market consensus by 25.80%.

Most sectors showed growth. Reflecting the solo activities of the main artist BLACKPINK's Lisa at the end of September, album sales recorded 8.9 billion KRW, up 152.2% year-on-year. Despite a slowdown in online concerts and album sales, digital content sales increased by 118.1% year-on-year to 13.5 billion KRW.

Merchandise sales also steadily continued at around 10 billion KRW, increasing by 99.3% year-on-year to 11.5 billion KRW. Additionally, advertising sales rose by 52.3% to 12.9 billion KRW during the same period, and music service sales increased by 67.7% to 19.1 billion KRW. Advertising sales marked the highest level in the past three years.

However, following the previous quarter, a fair value loss of approximately 16.5 billion KRW due to the decline in Tencent Music's stock price was reflected in non-operating income and expenses. Tencent Music's stock price fell from $15.4 (about 18,164 KRW) in the second quarter to around $7.2. As a result, net profit for the third quarter decreased by 64.3% year-on-year to 600 million KRW.

Positive factors such as the resumption of concerts and expansion of content business remain. An Jin-ah, a researcher at Ebest Investment & Securities, observed, "BLACKPINK's comeback and world tour are scheduled for the first half of next year, and a new girl group will debut. With the merger of Weverse and Vlive, various content businesses will also be pursued."

Accordingly, Ebest Investment & Securities maintained a "Buy" rating on YG Entertainment. The target price was raised from 75,000 KRW to 95,000 KRW. The closing price on the 12th was 71,500 KRW.