[Click eStock] HYBE Lowers This Year's Operating Profit Estimate by 23%... Target Price Down

[Asia Economy Reporter Hwang Yoon-joo] SK Securities maintained its 'Buy' rating on HYBE on the 4th but lowered the target price to 380,000 KRW. While the mid-to-long-term outlook remains positive, the decision was based on the expectation of a lower operating profit estimate for 2022.

Nam Hyo-ji, a researcher at SK Securities, stated, "We are lowering the 2022 operating profit estimate by 23% compared to the previous forecast due to additional costs from the development of numerous rookies and new business ventures this year."

HYBE recorded sales of 285 billion KRW in the first quarter of this year, a 59.8% increase compared to the same period last year, operating profit rose 62.7% to 37 billion KRW, and net profit surged 78.7% to 30.8 billion KRW. However, the operating profit fell short of the consensus estimate of 43.8 billion KRW.

Researcher Nam said, "From the second quarter, with BTS's comeback (June 10), as well as activities from Seventeen, TXT, and Le Sserafim, growth across all business divisions will be prominent," adding, "Sales are expected to increase by 66.5% year-on-year to 463.9 billion KRW, and operating profit is projected to rise 144.3% to 68.4 billion KRW."

HYBE's cash cow platform, 'Weverse,' will also unveil a new service (Weverse 2.0) in July. In the first quarter, Weverse's MAU (Monthly Active Users) was 6.4 million, a 5% decrease from the previous quarter. Although total payment amount declined by 10%, ARPPU (Average Revenue Per Paying User) increased by 27% quarter-on-quarter due to diversification in concerts and MD (special planning products and goods).

Researcher Nam evaluated, "With the launch of the new Weverse service in July and the start of services in the U.S. and Japan, MAU and payment amounts are expected to increase significantly," adding, "Starting with the entry of artists from V LIVE, a total of about 70 teams are expected to join by the end of this year."

He continued, "In the short term, stock prices are expected to be volatile due to uncertainties related to BTS's military enlistment," but added, "With various businesses such as gaming and NFT being unveiled, IP diversification, fandom lock-in, and external growth are anticipated."