[Click eStock] "NCSoft, New Game Momentum Delayed to Next Year... Earnings Estimates Inevitably Downgraded"

[Asia Economy Reporter Myunghwan Lee] Hana Securities announced on the 16th that it maintains a buy rating and a target price of 500,000 KRW for NCSoft. The company also pointed out that the delay in the release schedule of the new title makes it inevitable to lower earnings estimates.

NCSoft's sales in the second quarter of this year recorded 629.3 billion KRW, up 22.8% year-on-year, and operating profit increased by 116.7% to 123 billion KRW. The operating profit margin was 19.5%. While sales met market estimates, operating profit was nearly 10% below expectations.

Looking at the performance by title, 'Lineage W' experienced sales stabilization following the first quarter, with daily sales decreasing by 40% compared to the first quarter to 2.5 billion KRW. Hana Securities estimated that Lineage W's daily sales in the third quarter of this year would decrease by 30% compared to the second quarter, reaching the high 1 billion KRW range. The second region launch of Lineage W scheduled for the fourth quarter is expected to generate daily sales around 500 million KRW.

'Lineage M' continued to benefit from its 5th anniversary update, with sales in the second quarter increasing by more than 20% compared to the previous quarter. For 'Lineage 2M,' a decline compared to the previous quarter is expected in the third quarter as well. However, a rebound is anticipated in the fourth quarter due to the 4th anniversary update. Marketing expenses are expected to maintain about 10% of sales, considering the large-scale updates despite the absence of new titles.

The release of the company's major PC MMORPG title 'TL' has been postponed to next year. Assuming TL's release in the first quarter of 2023, Hana Securities expects annual sales to be in the 190 billion KRW range. However, it noted that nothing has been finalized regarding the game's business model, and the service method remains uncertain. TL is currently undergoing internal testing and will soon proceed to testing with general gamers.

Yoon Yeji, a researcher at Hana Securities, explained, "As the TL release schedule is adjusted, a downward revision of estimates is inevitable," but added, "Since the average price-to-earnings ratio (PER) expected for this year by the peer group rose somewhat after the earnings announcement, there is no change in the target price."