[Click eStock] "JYP, Weak First Half and Inexperienced Lineup... Target Price Down"

SKZ's Activity Hiatus and Weak Low-Experience Lineup Impact
Performance Improvement Expected in Second Half with SKZ World Tour
Next Year, SKZ Tour Expansion and Rookie Growth Anticipated

On the 26th, Korea Investment & Securities downgraded the target price of JYP Ent. (JYP) from 95,000 KRW to 88,000 KRW, citing weak first-half performance and underperformance of the low-experience lineup. The investment opinion 'Buy' was maintained. JYP's closing price on the previous trading day was 53,200 KRW.

Ando-young Ahn, a researcher at Korea Investment & Securities, stated, "The album sales of Stray Kids (SKZ), released on July 19, fell short of previous expectations, leading us to revise our earnings estimates." He added, "The reason for the stock's underperformance compared to other entertainment companies this year is the poor performance due to SKZ's activity gap in the first half and the weak low-experience lineup." SKZ's latest album's first-week sales (initial sales) closed at 2.36 million copies. This is a 36% decrease compared to the previous work (3.7 million copies) and about half compared to the career-high first-week sales of their third full album (4.61 million copies). However, Ahn noted, "From the second half of this year through next year, SKZ's world tour will prevent a performance gap like that in the first half, and since there are many debut teams this year (four teams), we can expect the second year to show significant growth for the low-experience lineup."

JYP's second-quarter sales are expected to be 97.1 billion KRW, with an operating profit of 20.6 billion KRW. This is expected to fall about 9% short of the market consensus forecast (operating profit of 22.8 billion KRW), representing a 55% decrease compared to the previous year. Ahn said, "This quarter had a very weak activity lineup, and many activities in Japan delayed revenue recognition." He added, "Album sales included TWICE's Nayeon (450,000 copies) and NEX7 (140,000 copies), while concert sales reflected ITZY's world tour (150,000 attendees, excluding Japan) and domestic performances by bands." SKZ released a digital single and held a Japanese fan meeting (130,000 attendees), but the digital single contributed little to earnings, and revenue from the Japanese fan meeting is expected to be recognized in the third quarter.

JYP is expected to show a pattern of low performance in the first half and improvement in the second half. Ahn said, "SKZ's activities are concentrated in the second half, and the second-quarter Japanese sales are also deferred to the second half, so the improvement in second-half performance compared to the first half is expected to be the largest among entertainment companies." The first half was weak with quarterly operating profits in the 20 billion KRW range, but the second half is expected to see quarterly operating profits in the 50 billion KRW range. The Japanese boy group NEX7 had disappointing domestic debut results in May due to low domestic recognition, but if they achieve good results in their August debut in Japan, it could serve as a 'second NiziU' momentum. Domestic and Chinese boy group debuts are also scheduled for the fourth quarter.