[Click eStock] Studio Dragon, Reason for Sideways Stock Despite Record High Earnings

[Asia Economy Reporter Ji Yeon-jin] Hana Securities stated on the 5th that Studio Dragon is positive about achieving record-high earnings in the second quarter and renewing its contract with Netflix, maintaining a steady recommendation to increase its weighting until the end of the year. However, due to the continued sideways movement of the stock price, the target price was lowered from 130,000 KRW to 110,000 KRW.

Studio Dragon achieved record-high earnings in the first quarter of this year, with sales and operating profit increasing by 49% and 96% respectively to 157.5 billion KRW and 27 billion KRW.

In the second quarter, about seven programs were scheduled, including the high-budget "tentpole" production "Our Blues," and sales exceeded 100 billion KRW for the first time in a quarter due to packages for Disney Plus (12 titles) and numerous OTT originals such as "Yumi's Cells 2" and "Strange." In the third quarter, there is one original each for Coupang and TVING, and one each for Disney Plus originals and simultaneous sales titles are also included.

In the fourth quarter, the largest blockbuster Apple TV production, along with one title each for Netflix, Disney Plus, Amazon, and TVING, is expected to have the highest number of OTT original sales.

Lee Ki-hoon, a researcher at Hana Securities, said, "Considering the record-high earnings due to expanded scheduling and increased recoupment rates amid intensified competition, as well as the contract renewal with Netflix within the year, both performance and momentum are at their highest levels, but the stock price remains in a box range. The key investment point is the continuation of record-high earnings through expanded scheduling and increased recoupment rates for at least 2 to 3 years, but the range of expected profit growth that investors consider has been fixed for quite some time."

The researcher added, "In the mid to long term, a stock price increase converging with fundamentals is expected, and it is necessary to achieve high success in the U.S. headquarters and multiple OTT original contracts beyond the existing tentpole range, as well as on U.S. OTT platforms such as Apple and Amazon."