[Click eStock] "SM, 'aespa' Chinese Fandom Strong... Sales Expected to Recover"

Daishin Securities analyzed on the 11th that the decline in Chinese group-buying volume, which was cited as a reason for SM's (SM) sluggish stock price, is highly likely to reverse. They maintained a 'Buy' investment rating and a target price of 160,000 KRW.

Im Sujin, a researcher at Daishin Securities, said, "Although the album sales of aespa, which has a high proportion of Chinese fandom, have fallen significantly short of expectations, resulting in a continued sluggish stock price trend, the Chinese group-buying sales volume for aespa's next album is likely to recover," adding, "Fortunately, there is no sign of the Chinese fandom of aespa leaving." Debuting in 2020, aespa has surpassed the sales volume of previous albums with each new release. However, the first-week sales (initial sales) of their latest album in November last year were 1.13 million copies, down 33.5% compared to the previous album's 1.69 million copies, and this was attributed to a decrease in Chinese group-buying volume.

Researcher Im stated, "(The decrease in Chinese sales) is mainly due to management issues rather than Chinese regulations," and added, "SM is expected to see sales growth from additional overseas fandom inflow as it begins with the release of aespa's English album in the first quarter and unveils a UK-based boy group production TV series, marking a full-scale entry into Western markets." Among the four major entertainment companies (HYBE, JYP, SM, YG), SM has the lowest proportion of overseas sales. As of the first half of 2023, HYBE accounted for 63%, JYP 52%, YG 49%, and SM 34%. It is expected that the relatively low overseas popularity, which has been pointed out as a weakness, will improve.

Meanwhile, SM's fourth-quarter 2023 earnings are forecasted to reach 251.4 billion KRW in sales and 24.9 billion KRW in operating profit, representing increases of 11.8% and 69.8%, respectively, compared to the same period in 2022. Album sales are expected to total 4.89 million copies, including 1.26 million for aespa, 2.5 million for NCT, and 578,000 for Red Velvet. Due to the decline in Chinese sales, this is expected to fall short of the anticipated 5.5 million copies. In the music segment, which saw many songs such as aespa's ‘Drama’ and Taeyeon's ‘To.X’ maintain top positions on domestic and international music charts in the fourth quarter, solid performance is expected. Concert sales are projected at 16.1 billion KRW, and merchandise sales at 28.8 billion KRW.