[Click eStock] "JYP, Target Price Lowered to 126,000 Won"

Kiwoom Securities lowered the target price of JYP Ent. to 126,000 KRW on the 20th while maintaining a buy rating.

Kiwoom Securities reflected the downsizing risk of album sales considering the recent decline in sales of ITZY and NMIXX, as well as the high base set by Stray Kids last year.

However, it is expected that the album gap will be minimized this year through a Japan-centered strategy. The steady growth of JYP360 and the global partnerships in North America are analyzed to indicate sustainability. Lee Nams, a researcher at Kiwoom Securities, said, "Although there is album risk, concerns are based on growth focused on margin, which will become clearer."

In the fourth quarter of last year, JYP Ent. recorded sales of 157.1 billion KRW and operating profit of 37.9 billion KRW. Album sales included 4.38 million copies of Stray Kids and 160,000 copies of NiziU. Revenues from Japan concerts by Stray Kids, TWICE, and NiziU, including dome performances, were deferred to 2024. The sales lineup was solid, including growth in global music streaming revenue, reflection of excess profit settlements from Live Nation North America concerts, and the highest-ever performance in the MD division due to strong Japanese concert merchandise sales. However, net profit sharply declined due to non-operating losses such as impairment losses from acquiring shares in the China JV and fair value evaluation of Naver Z.

JYP Ent. plans to further diversify its approach to the Japanese market by strengthening activities of TWICE, MISAMO, Stray Kids, NiziU, and NEXZ. Accordingly, Japan, which accounted for 39% of total concert attendance in 2023, is expected to increase its importance to around 62% in 2024.

The Japanese business is characterized by a high profit contribution due to net sales recognition. When reflecting the scale of concerts in Japan and the resulting growth in merchandise sales simultaneously, the operating leverage in Japan is expected to expand further.

In particular, NEXZ, scheduled to debut in the first half of the year, will be based in Japan but is expected to expand its Asian fandom base and grow as a global boy group. NiziU, which has already advanced beyond arenas to dome concerts, is also expected to continue active activities in both Japan and Korea. The market expansion in Japan, where TWICE and Stray Kids remain strong, is anticipated to increase profit contribution through sales growth and cost efficiency.

Although album risk remains, it is judged that concerns have already been reflected in the stock price. TWICE achieved their first million-seller debut with initial sales of 1.06 million copies. However, ITZY and NMIXX recorded initial sales of 620,000 and 320,000 copies respectively, showing sales growth but failing to overcome the high base of their previous releases. In the latter half of last year, Stray Kids’ initial sales of 3.7 million copies did not surpass their previous career-high initial sales of 4.61 million copies. Accordingly, the overall album growth for 2024 is forecasted to be downgraded. However, it is judged that related risks have been sufficiently reflected through the recent stock price decline.