[Click eStock] "SM 4Q Earnings May Disappoint... NCT's 'Storming Growth'"

Operating Profit Expected at Only Two-Thirds of Consensus
NCT's Overwhelming Growth as a Stepping Stone... aespa Also on the Rise
Expectations for Growth in Concert, Goods, and Album Sales Upward

According to the latest chart released on December 29 last year (local time), the group NCT 127 ranked 85th on the Billboard 200 with their third full-length album 'Sticker,' successfully entering the chart for 14 consecutive weeks. NCT's third full-length album 'Universe' ranked 20th on this chart. Photo by NCT. [Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] There is an analysis that SM Entertainment posted somewhat disappointing results in the fourth quarter of last year. However, based on the rapid growth of NCT, it is expected to demonstrate its capabilities as the largest domestic idol intellectual property (IP) holding company by creating various monetization structures such as dramas.

On the 18th, Kiwoom Securities maintained its 'Buy' investment opinion and target price of 105,000 KRW for SM Entertainment, citing these reasons. The closing price the previous day was 68,400 KRW. The consolidated sales for the fourth quarter of last year were estimated at 185.9 billion KRW, and operating profit at 16.7 billion KRW, representing increases of 0.9% and 1,137.9% respectively compared to the same period the previous year. Nevertheless, these figures fell significantly short of the market consensus of 214.2 billion KRW in sales and 24.7 billion KRW in operating profit.

However, the growth of NCT was highlighted as noteworthy. Based on the Gaon Chart Top 100, NCT’s individual groups and the full unit saw sales surge from 790,000 copies in 2019 to 4.82 million in 2020, and 10.77 million last year, an increase of over 1,200% in two years.

Namsoo Lee, a researcher at Kiwoom Securities, explained, "NCT has risen as a group aiming for top positions not only in Korea but also on the US Billboard and Japan Oricon charts," adding, "NCT 127’s second concert, starting at Seoul Gocheok Dome, will fully reflect the performance expectations of their first tour before COVID-19, which attracted about 250,000 people over more than 40 shows." He continued, "Especially since album sales have grown overwhelmingly, they will secure a more advantageous position when attracting overseas fans," and added, "This will strengthen profitability not only through concert revenue but also through related merchandise (MD)."

This year, with the resumption of concerts, fan industry strengthening is expected, and NCT’s album sales are projected to reach an all-time high. Additionally, Aespa, which achieved 570,000 sales for their first mini-album, is also expected to grow. The researcher analyzed, "Strengthening offline content will bring improvements not only in MD but also simultaneously in Dream Maker and the Japanese market," and added, "The subsidiary sector will also benefit comprehensively across music, dramas, and fan clubs, reflecting the solid performance of two major dramas by KeyEast and DearU Bubble."