[Click eStock] "NCSoft 1Q Strong Earnings... Optimism for This Year Remains"

[Asia Economy Reporter Myung-Hwan Lee] DB Financial Investment announced on the 16th that it maintains a buy rating and a target price of 650,000 KRW for NCSoft. This is because, despite better-than-expected first-quarter earnings, there is little change in earnings estimates.

The company's first-quarter revenue this year increased by 54% year-on-year to 790.3 billion KRW, and operating profit rose by 330% to 244.2 billion KRW. The first-quarter results exceeded market expectations of 733.5 billion KRW in revenue and 189.9 billion KRW in operating profit. Although PC games generally continued a weak trend, the performance of 'Lineage W,' released in November last year, contributed to external growth, and the mobile game 'Lineage M,' which had been sluggish in the previous quarter, stabilized and saw a rebound in sales. Operating expenses also decreased compared to the previous quarter, which included success bonuses for Lineage W and global launch advertising expenses, improving profitability.

DB Financial Investment expects the positive sentiment toward NCSoft to continue this year. With the influence of Lineage W, the trend of improved performance compared to the same period last year is expected to continue, and in the fourth quarter, regional expansion of Lineage W, application of non-fungible tokens (NFTs), and the release of 'Project TL' are scheduled. Additionally, DB Financial Investment analyzed that related expectations will continue as a total of seven games, including 'Blade & Soul S' and projects E/R/M, are expected to be released from the fourth quarter of this year through next year. Furthermore, details related to new IPs being developed in an open research and development (R&D) format are expected to be specified within this year, which could act as a positive momentum for next year's earnings outlook and stock price.

Hwang Hyun-jun, a researcher at DB Financial Investment, said, "It is unfortunate that the second phase release of Lineage W was postponed to the fourth quarter, delaying short-term momentum, but the story of earnings improvement based on Lineage W and other long-running games remains valid," adding, "The valuation appears sufficiently attractive, so I recommend buying."