[Click eStock] "Studio Dragon Target Price Lowered to 82,000 Won"

On the 8th, KB Securities lowered the target price of Studio Dragon to 82,000 KRW while maintaining a buy rating.

Netflix, a major client, announced investment plans similar to last year. Studio Dragon is expected to continue growing due to increased global direct production, expanded sales to other OTT platforms, and increased market share within domestic production companies.

Considering the global pipeline (about 20 projects planned, estimated delivery of 2 projects annually), increased pre-purchase contracts with Amazon and Disney, and its capital strength as the top domestic production company securing IP, sales growth is expected to continue. In terms of profitability, short-term improvement potential is low except for the opening of the Chinese market, but improvement is expected from 2024 when original work contract renewals are reflected.

In the first quarter, sales increased by 74.4% year-on-year to 211.1 billion KRW, and operating profit grew by 19.3% to 21.6 billion KRW, indicating an expansion in production scale. During the same period, the number of episodes was 73 for TV and 36 for OTT, about a 50% increase compared to the previous year, confirming the expanded production scale with a 74.4% growth in sales. In terms of profitability, the high number of original works and only 25 pre-purchased episodes resulted in an operating profit margin of around 10.4%.

For the second quarter, sales are expected to decrease by 3.1% year-on-year to 152.6 billion KRW, with operating profit forecasted at 18.5 billion KRW. Sales are expected to decline due to an absolute decrease in the number of episodes. The number of episodes in the second quarter is estimated to be 64 for TV and 13 for OTT, down by 23 and 7 episodes respectively compared to the same period last year. Pre-purchased works increased to 38 episodes due to increased deliveries to new OTT platforms, which is expected to improve profitability.