[Click eStock] "SM, Profit Improvement to Continue with Increased Concert Activities"

Samsung Securities Report

[Asia Economy Reporter Minji Lee] Samsung Securities maintained a buy rating and a target price of 95,000 KRW for SM on the 15th. This is based on the expectation that profit growth will continue next year due to the expansion of album and digital music sales as well as concert scale.

In the third quarter, SM recorded consolidated sales of 238.1 billion KRW and operating profit of 29.8 billion KRW, marking a 65% and 201% increase respectively compared to the same period last year. Operating profit exceeded market expectations by 17%. This was thanks to NCT 127’s 4th full-length album and aespa’s 2nd mini album becoming million sellers, which led to a 14.5% increase in album and digital music sales during the same period. Offline activities were also effective, with active artist performances driving concert sales up by 1,315% to 10.9 billion KRW. Merchandise and licensing sales increased by 76% to 26.4 billion KRW.

SM Town concerts were held once domestically and three times in Japan, and NCT 127 concerts were also held, resulting in improved performance for Dream Maker, which is in charge of concert planning, as well as the Japanese subsidiaries SMC and SMEJ Plus. SM C&C’s results also expanded due to increased advertising promotion events and travel demand. Accordingly, the combined sales of major subsidiaries rose 119% to 136.9 billion KRW, and operating profit turned positive to 3 billion KRW.

Profit estimates for the fourth quarter are expected to be slightly revised downward as the release date for NCT’s full group new album has been postponed to early next year. However, this is only a timing difference, and the expansion of artist performance is expected to continue. Minha Choi, a researcher at Samsung Securities, said, “We have confirmed the early termination of the Like Planning and producing contract by the end of this year, and there is a high possibility of utilizing internal personnel in the future, which will improve the profit and loss structure,” adding, “A new boy group is expected to debut in the first half of next year.”