[Click eStock] DearU, Target Price Up with Japan Expansion and SM Acquisition Benefits

[Asia Economy Reporter Lee Seon-ae] Kiwoom Securities announced on the 15th that it maintains a buy rating on DearU and raises the target price from 58,000 KRW to 68,000 KRW. This outlook is based on expected synergies with Japan's M-up Holdings and the effects of the SM Entertainment (SM) acquisition battle. The closing price on the previous trading day was 49,300 KRW. DearU is a subsidiary of SM.

Namsoo Lee, a researcher at Kiwoom Securities, stated, "DearU has announced the launch of 'bubble for Japan' through the establishment of a joint venture (JV) with M-up Holdings, Japan's largest entertainment and fandom service company." He added, "M-up Holdings operates over 300 intellectual property (IP) teams and more than 2 million paid fan club members, so attention is focused on the future synergy with bubble."

He continued, "We expect an increase of 500,000 Universe users and 200,000 Chinese Android users in the first half of the year, along with an expansion of organic growth." He noted, "With the expansion of the world tour, organic growth, which was previously in the range of 8-12% quarter-over-quarter, is expected to exceed 20% in the first quarter of this year. The second half is the peak season for K-POP world tours, and the benefits from 'bubble for Japan' will lead to top-line growth."

Additionally, the researcher said, "Major artists such as IVE and (G)I-DLE will join bubble after mid-February," and "EXO's Baekhyun will also return, and the number of bubble subscribers this year is expected to reach 3.8 million, a 130% increase compared to the previous year." He projected that DearU will achieve sales of 116 billion KRW and operating profit of 49.9 billion KRW this year, representing increases of 136% and 206.3% respectively compared to the previous year.

Kiwoom Securities stated that DearU will benefit regardless of whether HYBE or Kakao wins the SM acquisition battle. Researcher Lee said, "If HYBE wins, HYBE and YG Entertainment's IP could be introduced to DearU," adding, "Together with HYBE's platform 'Weverse,' DearU will establish a dominant position in the fandom platform market." He also said, "If Kakao gains the upper hand, Kakao's IP and content can be utilized on bubble," concluding, "The outcome of the SM acquisition battle is more promising than concerning."