[Click eStock] "Netmarble Faces Increased Cost Burden, Key Is Second Half Performance"

[Asia Economy Reporter Myunghwan Lee] Korea Investment & Securities announced on the 13th that it maintains a buy rating on Netmarble but lowers the target price from the previous 140,000 KRW to 100,000 KRW. This is due to the first quarter earnings falling short of market expectations while fixed costs increased.

Netmarble's first quarter revenue this year rose 10.7% year-on-year to 631.5 billion KRW, but operating loss turned to 11.9 billion KRW, falling short of market forecasts. Domestic revenue was 102.1 billion KRW, down 39.3% from the same period last year, showing weakness. This is analyzed to be due to no new releases and continued decline in sales of major lineups. Overseas revenue was 529.4 billion KRW, up from the same period last year but down compared to the previous quarter. Operating expenses increased 24.6% year-on-year to 643.4 billion KRW. Although commissions decreased due to weak sales, labor and marketing costs increased.

Korea Investment & Securities emphasized that the performance of upcoming new releases is crucial. Netmarble plans to launch more than 10 new titles this year, including Seven Knights Revolution, The Second Country, Merge Kungya Island, and BTS Dream. However, the first quarter sales of existing lineups were weaker than expected, and fixed cost burdens such as labor and marketing expenses increased, making the success of new releases more important, according to Korea Investment & Securities. Nevertheless, the release schedules for titles planned for the second quarter are set, reducing uncertainty, and many new releases based on major IPs are expected in the first half of the year, raising expectations for performance.

Researcher Hoyoon Jung of Korea Investment & Securities said, "Many new lineups are waiting, and there are titles that can be expected to perform well," adding, "Earnings are expected to gradually improve from the third quarter onward."