[Click eStock] Krafton Faces Poor Performance in Peak Season... Target Price Down 17%

NH Investment & Securities Report

[Asia Economy Reporter Minji Lee] NH Investment & Securities maintained its buy rating on Krafton on the 7th and set a target price of 290,000 KRW, down 17%. This reflects the impact of the stock market adjustment and the rise in the risk-free interest rate due to interest rate hikes.

First, Krafton's expected sales for the third quarter are projected to be 469.8 billion KRW, with an operating profit of 157.9 billion KRW. This represents a decrease of 10% and 19%, respectively, compared to the same period last year. Jaemin Ahn, a researcher at NH Investment & Securities, analyzed, "Despite the third quarter being the peak season, mobile game sales growth slowed due to increased offline activities," and added, "The suspension of service for Battlegrounds in India inevitably led to a decline in related sales."

Mobile sales are expected to decrease by 11.5% to 336.9 billion KRW. This reflects the slowdown in sales of China's Peacekeeper Elite and the impact of the service suspension in India. PC sales are predicted to decline by 8% to 118.1 billion KRW. Thanks to the Assassin's Creed and McLaren collaboration effects, growth is expected to continue compared to the previous quarter. Marketing expenses are expected to increase by 33% year-on-year to 27.2 billion KRW due to TV advertising in the U.S. and participation in Gamescom.

However, the upcoming release of ‘Callisto Protocol’ on December 2 is a positive factor. There is expected to be an opportunity to experience Callisto Protocol at G-Star 2022 held next month in Busan, which is anticipated to attract interest not only from overseas but also from domestic gamers.