[Click eStock] NCSoft, Focus on Lineage W Revenue Downgrade

[Asia Economy Reporter Junho Hwang] Kiwoom Securities lowered NCSoft's target stock price from 650,000 KRW to 530,000 KRW on the 18th, considering the downward revision of Lineage W's Region 1 sales and the delay in the launch of Region 2.

Kiwoom Securities predicted that Lineage W's second-quarter sales stabilization would follow a trend similar to its predecessors, Lineage M and Lineage 2M. Accordingly, Lineage W's sales are expected to decrease by about 40%, leading to a decline in operating profit levels. Additionally, the launch of Lineage W Region 2 has been postponed from the third quarter to the fourth quarter of this year, so revenue recognition for this game should be changed from the third quarter to the first quarter of next year.

NCSoft's labor costs this year are expected to increase by only 10% compared to the previous year, and the marketing expense ratio relative to sales is anticipated to remain at a similar level as last year, limited to within 10% according to company policy.

However, increased operating costs such as servers due to expanded live services may partially limit the growth of operating profit. Considering this, operating profit for this year is expected to reach 557.3 billion KRW, a 49% increase from the previous year, with an operating profit margin of 20%, improving by 3.8 percentage points compared to last year.

Jingu Kim, a researcher at Kiwoom Securities, analyzed, "The main new title TL aims to be a triple-A game, but considering user criticism that the combat system has not escaped the framework of Lineage, it should add new gameplay elements to expand positive user feedback."

He added, "To enhance competitiveness in the metaverse business, the company should internalize external solution technologies or actively invest in this sector," and stated, "If the company discloses achievements and core strategies related to the metaverse business, it is expected to act as a positive factor for corporate value."