[Click eStock] "NCSoft Falls Short of Operating Profit Expectations... Target Price Lowered to 350,000 Won"

Meritz Securities announced on the 13th that it has lowered the target price for NCSoft from 430,000 KRW to 350,000 KRW. The investment rating was maintained as Buy.

Researcher Lee Hyo-jin of Meritz Securities stated, "We reflected the existing mobile game performance and new release schedule, and considered that the new titles aiming for global launch will be fully active in 2H24," adding, "The valuation period for the target price calculation was changed from 2024 to Q4 this year through Q3 2025."

Meritz Securities’ consolidated Q4 revenue and operating profit were 437.7 billion KRW and 3.9 billion KRW respectively, significantly below expectations. Mobile revenue slightly rebounded quarter-on-quarter, but PC revenue declined despite the domestic launch effect of TL. At year-end, other losses occurred due to the restructuring of underperforming businesses such as EntribSoft, resulting in a pre-tax loss.

Researcher Lee Hyo-jin analyzed, "Rather than the domestic financial performance of TL, the Amazon contract deposit is expected to be between 60 to 100 billion KRW (excluding RS), so we anticipate related revenue effects after the start of overseas service," adding, "However, Amazon Games is a variable. They are undergoing restructuring as performance, including Lost Ark, has deteriorated."

Lee Hyo-jin believes that what NCSoft needs now is not mergers and acquisitions (M&A), but operational efficiency of the core business and enhancement of shareholder value.

He said, "What NCSoft currently needs is management efficiency focused on restructuring loss-making businesses rather than M&A. Over the past 10 years, sales have doubled, but labor costs have increased about fourfold. Focusing on improving the profitability of the core business and enhancing stock value through share buybacks and cancellations, as seen in recent government corporate value programs, seems more meaningful in terms of cash utilization."