[Click eStock] "YG Entertainment, Annual Earnings Estimates Lowered... Target Price Down"

Yuanta Securities announced on the 14th that it is lowering its earnings estimates for YG Entertainment (YG Entertainment) this year. While maintaining a 'Buy' investment rating, the target price was lowered to 60,000 KRW.

Researcher Lee Hwan-wook of Yuanta Securities explained, "The consolidated operating loss for the first quarter was 7 billion KRW, marking a return to deficit," adding, "This significantly missed market consensus." The operating loss on a separate basis was 6.7 billion KRW. Compared to the average operating profit of 6.6 billion KRW in past quarters with major IP activity gaps, the decline in operating profit has widened.

Lee stated, "The main factors include a decrease in profit due to the absence of high-margin (album) sales and a reduction in scale, launch costs for Baby Monster and new IP investment costs of about 5 billion KRW, increased amortization expenses of intangible assets (exclusive IP contracts & music copyright acquisitions) of about 3.5 billion KRW, and valuation losses on YG Investment products."

However, the second quarter is expected to see a continuous increase in IP activities of affiliated artists throughout the second half of the year and next year, following the debut of Baby Monster. He emphasized the need to pay attention to the steep growth curve of 'Baby Monster,' noting the high global attention with debut album sales of 460,000 copies, 10 million monthly Spotify listeners, and 350 million monthly YouTube views.

Lee added, "Rapid monetization is expected next year," and "Coupled with the full-group activities of BLACKPINK, this is expected to drive steep earnings growth in 2025."