[Click eStock] "HYBE, Promising New Business and Core Operations This Year"

Operating Profit in Q4 Last Year Fell 9.5% Short of Consensus
KB Securities "Maintains Hive Target Price at 500,000 Won"

[Asia Economy Reporter Gong Byung-sun] HYBE is expected to post its best-ever quarterly performance in the fourth quarter of last year, despite falling short of market consensus. This year, new businesses and core operations are expected to harmonize.

On the 17th, KB Securities estimated HYBE's fourth-quarter revenue last year at 402.4 billion KRW, up 28.9% year-on-year, and operating profit at 72.3 billion KRW, up 30.1% during the same period. The operating profit is 9.5% below consensus.

However, this still represents the highest quarterly performance in history. Annual revenue is also expected to reach 1 trillion KRW. KB Securities estimated HYBE's revenue last year at 1.2 trillion KRW, up 50.8% year-on-year, and operating profit at 189 billion KRW, up 29.7% during the same period.

New businesses are expected to provide growth momentum. In the first half of this year, HYBE plans to launch the fandom platform ‘Weverse 2.0’. KB Securities analyst Lee Seon-hwa said, “By integrating with V Live, expanding content such as games and webtoons, and launching Weverse 2.0, we expect artists under Ithaca Holdings to join Weverse. Weverse 2.0 will strengthen the reward system for fans, including free airdrops of non-fungible tokens (NFTs), becoming a leader in the F2E (Fan to Earn) ecosystem.” An airdrop refers to distributing newly issued cryptocurrency into users’ wallets.

With the reopening of the economy this year, core operations are also expected to recover. Artists’ intellectual property (IP) has become richer since last year. In the fourth quarter of last year, HYBE sold 2.13 million albums of SEVENTEEN and 1.3 million albums of ENHYPEN, but total album sales decreased by 20.3% year-on-year to 4.77 million albums. This indicates a reduced dependence on BTS (Bangtan Sonyeondan).

So far, BTS has contributed to revenue growth and profitability by holding hybrid online-offline concerts. However, merchandise (MD) sales, which are usually sold in large quantities at offline concerts, suffered due to supply issues caused by the logistics crisis in the United States, leading to sluggish sales. Additionally, the Weverse Con held at the end of the year was more of a fan service event than a profit-making one, resulting in cost burdens.

The analyst said, “Due to the spread of the new COVID-19 variant Omicron and the tapering issue, the current stock price has fallen 45.8% from its peak. However, with the world tour resuming starting with the Seoul concert in March and business expansion into games, webtoons, and NFTs planned, the stock price decline is excessive.”

Accordingly, KB Securities maintained its ‘Buy’ rating and a target price of 500,000 KRW for HYBE. The closing price on the 14th was 284,000 KRW.