[Click eStock] Netmarble, New Release Performance in Focus 'Target Price Raised'

Kiwoom Securities maintained its investment opinion of Marketperform (neutral) on Netmarble on the 1st and announced an upward revision of the target price. The target price was slightly adjusted from KRW 52,000 to KRW 56,000.

Jingu Kim, a researcher at Kiwoom Securities, explained, "The target price is the result of applying a price-to-earnings ratio (PER) of 25 times and an annual discount rate of 10% to the estimated controlling shareholder equity of KRW 212.5 billion for 2024, which fully reflects the performance of the company's main new releases."

The changes compared to the previous estimation logic include the postponement of the release schedules for the new titles Asdal Chronicles and Solo Leveling: ARISE, delaying the application of initial quarterly sales from Q3 and Q4 of this year to Q4 and Q1 of next year, respectively, reflecting a one-quarter delay. The initial daily average sales per game were realistically adjusted from KRW 1.5 billion to KRW 1 billion, considering recent variables such as the increase in average revenue per user (ARPU) in the domestic game market and intensified competition. The assumption of a downward stabilization of daily average sales next year was also reflected, with Asdal Chronicles at KRW 600 million and Solo Leveling: ARISE at KRW 700 million.

For games scheduled to be released in China, the estimation logic assumed initial daily average total sales of KRW 500 million for The Seven Deadly Sins, based on a Q3 release, and a 10% revenue share (RS) as a technical fee. For Ni no Kuni, assuming a Q4 release and considering that the sales ranking in Chinese-speaking regions such as Taiwan?a leading indicator of success in China?is somewhat more favorable than that of The Seven Deadly Sins, initial daily average total sales were assumed at KRW 800 million with an RS of 20%, including IP royalties and development fees. On the cost side, IP royalties were reflected as 10% of total sales to derive the figures.

Researcher Kim stated, "Given the significantly enhanced competitiveness of mobile games in China, it is difficult to predict success solely based on the momentum of license issuance. As previously mentioned, considering the considerable downward stabilization of the sales rankings of the company's main games in the Chinese market, the estimates we have assigned represent a neutral or better outcome." He added, "Furthermore, the company's most anticipated title, The Seven Deadly Sins: Origin, had its release schedule postponed by one quarter from Q1 to Q2 of next year due to additional development time. However, considering the expectations for this game, the initial daily average sales remain reflected at the previously estimated KRW 1.5 billion."

Meanwhile, to secure visibility and growth in operating profit, Netmarble needs to enhance the medium- to long-term sustainability of its business through PLC management of multiple live games and increase the development proportion of differentiated new titles capable of responding to multi-platform types like The Seven Deadly Sins: Origin. Researcher Kim emphasized, "We positively assess the company's more flexible response to this strategy compared to the past, and we want to point out that if solid results are generated from this, the investment opinion could be upgraded."