[Click eStock] "Netmarble, Increasing Deficits and Delayed New Releases... Investment Rating and Target Price Downgraded"

[Asia Economy Reporter Hwang Yoon-joo] Samsung Securities analyzed on the 12th that despite the release of new titles in the third quarter, Netmarble's profit rebound would not be significant. Accordingly, the investment rating was downgraded to 'Hold,' and the target stock price was lowered by 30% to 70,000 KRW.

Researcher Oh Dong-hwan of Samsung Securities stated, "The operating loss in the second quarter was 34.7 billion KRW, expanding from 11.9 billion KRW in the first quarter, significantly missing the consensus operating profit of 6.7 billion KRW."

Researcher Oh explained, "Marketing expenses increased by 28.0% compared to the previous quarter due to the pre-recognition of marketing costs related to games released in the second quarter and Seven Knights Revolution, which was launched in July."

During the second quarter, Netmarble released new titles such as Disney Mirror Guardians and Merge Kungya Island, in addition to Ni no Kuni Global, but their performance was minimal. On July 28, the most anticipated title of the second half, Seven Knights Revolution, was released and secured the 4th to 5th place in domestic Google Play sales rankings.

Researcher Oh forecasted, "The current daily sales of Seven Knights Revolution are estimated to be around 500 million KRW, but considering the natural decline in sales, the average daily sales in the third quarter are expected to fall below this. The next title is expected to be delayed until after the fourth quarter."

He pointed out, "Still, the third quarter may see an increase in sales and a return to operating profit compared to the previous quarter due to the full reflection of Seven Knights Revolution's sales, but the scale is not expected to be large."

Researcher Oh analyzed, "Frequent delays in new releases, poor performance, and increased marketing expenses have continuously weakened Netmarble's operating profit base. Among the remaining new titles, a significant portion consists of P2E games, but due to the cryptocurrency market crash, their chances of success have diminished."

He emphasized, "For a future stock price rebound, it is necessary to 1) achieve success with new titles, 2) improve cost structure, and 3) see an increase in the stock price of held shares."