[Click eStock] "Incross Expected to Benefit from Full Bloom of OTT Advertising Market"

[Asia Economy Reporter Kwon Jae-hee] Kiwoom Securities maintained a 'Buy' rating on Incross on the 17th, setting a target price of 24,000 KRW.

Incross's third-quarter sales are expected to exceed market consensus, with revenue of 14 billion KRW and operating profit of 5.7 billion KRW. The media rep, which struggled in the first quarter, has been recovering since the second quarter and is rapidly normalizing. Additionally, advertising volume, which decreased in the first half, is likely to be concentrated toward the end of the year, suggesting a bottom-heavy trend.

The growth of performance advertising, which can target consumers, is also contributing to the strong performance of the media rep. While brand image advertising is expected to decline due to anticipated consumer spending contraction, the performance advertising sector, which directly drives consumption, is expected to continue growing. Furthermore, T Deal, which showed sluggish growth in the first half, is expected to benefit from marketing effects such as Time Deal and Brand Day. The number of handled products is also steadily increasing, so the contribution of the growing Time Deal to earnings is expected to continue.

Direct benefits from the introduction of advertising on online streaming services (OTT) are also anticipated. Netflix plans to introduce an ad-supported plan in November, and Disney Plus in December. Since ad-supported plans have already been introduced on HBO Max, Hulu, and others, consumer confusion is expected to be minimal. Considering that the introduction of ad-supported plans is a strategy to secure subscribers and strengthen profitability, active involvement from OTTs is expected, leading to rapid institutional establishment.

The introduction of global OTT ad-supported plans is also expected to impact domestic OTT services. If applied to Netflix and Disney Plus, subscription fee reversals with domestic OTTs could occur. Incross has the Darwin Wave advertising product, which connects the video advertising network platform Darwin with Wave. Currently, advertising is limited to pre-roll exposure during live channel playback, restricting ad space and time, but if an ad-supported plan is introduced, expansion to VOD and other formats is highly likely. Additionally, since ads are targeted at domestic viewers, it is effective in increasing advertisers' return on investment (ROI). Consumer analysis data is already being accumulated through T Deal, so future targeting sophistication is expected to accelerate, allowing Incross to best capture advertisers' needs.

Namsoo Lee, a researcher at Kiwoom Securities, analyzed, "If T Deal's contribution to earnings improves profitability, OTT ad-supported plans will simultaneously enhance top-line and profitability. The performance showing growth across all sectors has high potential for leveling up alongside changes in the OTT advertising market."