[Click eStock] "YG Entertainment, Big Bang Comeback in Q2... High Growth Expected"

Hana Financial Investment Report

[Asia Economy Reporter Minji Lee] Hana Financial Investment maintained its buy rating and target price of 81,000 KRW for YG Entertainment on the 24th. This is based on the judgment that stable performance will be delivered this year, considering Big Bang's comeback and the increasing album sales speed of Treasure.

In the fourth quarter of last year, YG Entertainment recorded sales and operating profit of 89 billion KRW and 13.2 billion KRW respectively, marking growth of 4% and 148% compared to the same period last year. The profit significantly exceeded the market expectation of 4.9 billion KRW. Separate operating profit was 6.5 billion KRW; despite no activities except for Song Minho's comeback, the change from settlement-based to scheduled revenue recognition to reduce volatility in digital content performance resulted in an increase of 8 billion KRW more than expected.

Profit growth from YG Plus also contributed. It recorded 8.8 billion KRW, a 56% increase compared to the same period last year, which was quite good. Other income from YG Investment, including valuation gains from Zepeto, was reflected at 10.5 billion KRW in distribution sales such as music, the core business. Non-operating items included approximately 2 billion KRW combined from the write-off of 'Joseon Exorcist' bad debts and Tencent Music valuation losses.

Big Bang's comeback is confirmed for the second quarter of this year. Treasure's album sales have also doubled, proving the high growth of K-pop. Treasure's album sales per album last year were 330,000 copies, but they recorded 700,000 copies in their comeback in February this year. In 2020, Blackpink sold about 1.2 million copies, approximately four times more than their previous albums. Treasure's sales doubled compared to their previous albums, showing that K-pop album sales and global sales expansion are experiencing high growth. Kihoon Lee, a researcher at Hana Financial Investment, said, "Even assuming Blackpink's fandom has not grown compared to 2020, album sales this year will be around 4.5 million copies, a fivefold increase compared to 2019," adding, "YG Plus is expected to contribute profits of at least around 25 billion KRW this year."

Considering that in 2016, Big Bang alone generated operating profit exceeding 30 billion KRW, this year's operating profit estimate of 60 billion KRW is analyzed to be overly conservative. Researcher Kihoon Lee said, "Big Bang's tour resumption, the dramatic turnaround of the previously loss-making YG Plus, the performance contributions of Blackpink and Treasure, and synergy effects with Weverse will appear this year," adding, "In the past six months, estimates have been raised by about 10 billion KRW, and as this trend continues, corporate value will steadily rise."