Declining Earnings Lead to Reduced Drama Production... Studio Dragon Faces Dark Times

Securities Firms Lower Target Prices One After Another
"Fewer Drama Productions Expected This Year"

The stock price of Studio Dragon has been struggling to rebound. This is due to last year's poor performance and forecasts that the number of drama productions will decrease this year. Securities firms are also rushing to lower their target prices.

According to the financial investment industry on the 9th, Studio Dragon's stock price closed at 47,800 KRW as of the previous day's closing price. This represents a 42.96% decline from the closing price of 83,800 KRW on January 2 last year. Compared to the end of last year, it is down 7.18%.

The cause of the stock price decline is attributed to poor performance. In the fourth quarter of last year, consolidated sales amounted to 161.1 billion KRW, with an operating loss of 3.8 billion KRW. Sales decreased by 15.4% compared to the same period the previous year, and operating profit turned to a loss. Jeong Jisoo, a researcher at Meritz Securities, said, "In the fourth quarter of last year, a total of 71 episodes of dramas such as Sparkling Watermelon, Diva of the Deserted Island, and Maestra were aired," adding, "This is a decrease of 30 episodes compared to the fourth quarter of 2022, making a reduction in scale inevitable."

Lee Kihoon, a researcher at Hana Securities, explained, "There were many one-time costs, including about 5 billion KRW for dismantling the Osan city set of 'Aramun's Sword' and about 2 billion KRW in retirement pay for the CEO of the subsidiary Hwa & Dam, totaling 7 billion KRW in expenses," and added, "Non-operating losses included a goodwill impairment loss of 13.3 billion KRW for Hwa & Dam."

The outlook for this year is also uncertain. According to FnGuide, securities firms forecast Studio Dragon's sales and operating profit for this year to be 802.2 billion KRW and 77.5 billion KRW, respectively. This represents decreases of 9.25% and 14.55% compared to six months ago, when sales were 884 billion KRW and operating profit was 90.7 billion KRW. Some securities firms even expect annual sales to drop to the 700 billion KRW range. Shin Eunjeong, a researcher at DB Financial Investment, explained, "The annual number of productions is expected to be 24 to 26, but due to the absence of the tvN Wednesday-Thursday slot since May 2023, it may decrease compared to 29 productions last year."

Securities firms are also lowering their target prices for Studio Dragon. From the 1st to the 8th of this month, all six securities firms that released reports on Studio Dragon lowered their target prices. DB Financial Investment even downgraded its investment opinion from Buy to Hold. Shin Eunjeong, a researcher at DB Investment Securities, emphasized, "It will be necessary to approach by checking quarterly performance, such as growth in scale through overseas local productions and margin improvement through an increased proportion of in-house productions."