[Click eStock] "HYBE, Exclusive Contract with UMG → Profitability Improvement... Target Price Maintained"

Last Year's Music Sales, 86% Overseas Share
Up to 15 Billion KRW Revenue Increase Due to Commission Rate Adjustment
'Fastest Entry to Tokyo Dome' NewJeans Comeback Also a Positive Factor

Daishin Securities analyzed on the 28th that HYBE, which signed an exclusive distribution contract with Universal Music Group (UMG), will see overseas music sales improve by 7-14%. UMG, the world's largest music label and original music distributor, will exclusively distribute physical albums and digital music released by HYBE's labels in the global market for the next 10 years. The investment opinion 'Buy' and target price of 330,000 KRW were maintained. HYBE's previous closing price was 224,000 KRW.

Sujin Lim, a researcher at Daishin Securities, said, "HYBE's overseas music sales are expected to improve by 7-14%," adding, "Music sales revenue is settled through distributors (such as UMG), and the distribution commission rate is being adjusted favorably."

HYBE's annual music sales last year amounted to 298 billion KRW. Overseas music sales from HYBE's overseas labels were 150.2 billion KRW, and overseas music sales from domestic labels were 107.1 billion KRW. As a result, 86% of last year's music sales were generated overseas. Therefore, the effect of commission rate adjustment due to the exclusive distribution contract is expected to be considerable. Researcher Lim stated, "Based on last year's sales, if the commission rate for overseas music sales of domestic labels is adjusted by 5%, sales increase by 7.7 billion KRW, and by 10% adjustment, sales increase by 15 billion KRW."

Researcher Lim added, "Another point of expectation from this contract is the anticipated entry of UMG artists into Weverse," noting, "UMG houses numerous global artists such as Taylor Swift and The Weeknd." HYBE is expected to promote Weverse entry focusing on young artists with demand among them. According to HYBE, the recent entry of Conan Gray into Weverse was also part of this contract. Lim said, "From a revenue perspective, it is judged to have a more long-term important meaning in expanding Weverse's position as a global fandom platform."

HYBE also announced that NewJeans will hold a fan meeting at Tokyo Dome in June, along with their comeback schedule in May. As an overseas artist, they set an unprecedented milestone by entering Tokyo Dome in the shortest period (1 year and 11 months) since debut. Researcher Lim said, "The size of NewJeans' fandom, as identified by the company, indirectly shows that it has grown to a mega IP (intellectual property) level that has already held concerts at Tokyo Dome," adding, "Considering this, the world tour planned for 2025 is expected to attract at least 300,000 attendees, even conservatively."

Researcher Lim concluded, "With many positive momentum remaining, we maintain a Buy rating on HYBE as the top pick in the industry," and added, "Five new releases are scheduled from March 29 with J-Hope to May 24 with NewJeans, and revenue from Ariana Grande's music sales is expected to be confirmed in the second quarter results." Grande is affiliated with SB Projects under Ithaca Holdings, acquired through HYBE America. After releasing her 7th studio album on the 8th, she reached No. 1 on the Billboard Hot 100. If she maintains top chart positions for two quarters, it is estimated that net sales of about 20 billion KRW per quarter will be generated.