[Click eStock] "Krafton, Highest Quarterly Revenue Ever... Target Price Raised from 290,000 to 340,000"

PC and Mobile Earnings Surprise
Increased Profit Strength, New Release Momentum... Low Valuation Burden
"Operating Profit Likely to Achieve High Growth Compared to 2022"

Daishin Securities raised the target price for Krafton from 290,000 KRW to 340,000 KRW on the 9th, citing the company's record-high first-quarter sales. The investment opinion 'Buy' was also maintained. Krafton's closing price on the previous trading day was 260,000 KRW.

Lee Ji-eun, a researcher at Daishin Securities, said, "The 12-month forward earnings per share (12MF EPS) is 14,877 KRW, applying a target price-to-earnings ratio of 22.6 times," adding, "The anticipation for new releases scheduled for the second half of the year is a multiple premium factor." She also stated, "By revising upward the existing game sales, the 12MF EPS estimate was also raised by 19% compared to the previous estimate, which led to the increase in the target price."

Krafton's first-quarter sales were 665.9 billion KRW, with an operating profit of 310.5 billion KRW. Both sales and operating profit exceeded consensus (market average estimates) by 17% and 29%, respectively. PC sales (243.7 billion KRW) marked an all-time high. Due to the peak season and the 7th anniversary update effect, a high average revenue per user (ARPU) was recorded. Steam's average traffic increased by 21% compared to the previous quarter.

Mobile sales amounted to 402.3 billion KRW. Although the commission revenue from Peacekeeper Elite was estimated to decrease by 21% compared to a year ago, the March update reduced the expected decline to about 10%. Overall, strong performances in both PC and mobile segments led to an 'earnings surprise.'

There were no notable items in first-quarter operating expenses, but an increase in marketing expenses related to new releases is expected from the second quarter. Additionally, it has been confirmed that the release schedules of some new titles this year have changed. Dark and Darker Mobile is scheduled for sequential global releases starting domestically in the third quarter, while Enjoy and Black Budget are expected to launch in 2025. Furthermore, four second- and third-party publishing new titles, including Cookie Run: Kingdom, are planned for release within this year.

Researcher Lee said, "As the profit-generating capacity of PUBG intellectual property (IP) increases, the recent stock price rise driven by earnings and new release momentum still carries a low valuation burden," adding, "Even in the typically off-season second quarter, excluding the absence of new releases and the India region (where sales will begin from the third quarter of 2023), operating profit can achieve high growth compared to the previous year."