[Click eStock] "NCSoft, Target Price Down Due to New Game Release Delay"

[Asia Economy Reporter Kwon Jaehee] Yuanta Securities maintained a 'Buy' rating on NCSoft on the 16th but lowered the target price to 530,000 KRW.

NCSoft's Q2 earnings recorded sales of 629.3 billion KRW and operating profit of 123 billion KRW, up 17% and 9% respectively compared to the same period last year, but fell short of market expectations.

Sales by game were 223.6 billion KRW for 'Lineage W', 141.2 billion KRW for 'Lineage M', 96.2 billion KRW for 'Lineage 2M', and 25.7 billion KRW for 'PC Lineage'. The addition of 'Lineage W' sales, which did not exist last year, increased total sales compared to the previous year, but due to the endemic effect, natural decline of existing games, and absence of new game releases, the results fell short of market expectations.

NCSoft is expected to see a smaller decline in the second half of the year compared to Q2. 'Lineage W', which accounts for the largest portion of NCSoft's sales, recorded daily sales of 2.5 billion KRW in Q2, remaining at a high level. Although natural decline is inevitable, successful August updates and still solid DAU (Daily Active Users) traffic indicators suggest the decline will be less than in Q2. 'Lineage M' saw an increase in sales following the 5th anniversary update on June 8, with dormant customers returning. This trend is expected to continue in the second half. 'Lineage 2M' is anticipated to see a sales rebound with the 3rd anniversary update in Q4, but the release of the highly anticipated new major title 'TL' has been postponed to 2023, so meaningful performance recovery is expected from 2023 onward.

Researcher Lee Changyoung of Yuanta Securities analyzed, "The release of TL, which was expected to surpass Lineage, has been postponed to the first half of 2023. Along with this, the launch of 'Lineage W' in North America and Europe and 'Blade & Soul 2' in Japan and Taiwan have also been delayed to the first half of 2023. Amid the natural decline in sales of existing games, the consecutive delays in new game releases make it inevitable to revise down the 2022 earnings forecast."