[Click eStock] "JYP Entertainment Needs Rapid Growth of Low-Experience Artists... Target Price Down"

Target Price Revised Downward by 15% Compared to Previous Level

On the 1st, KB Securities downgraded the target price of JYP Ent. from 80,000 KRW to 68,000 KRW, citing the essential need for rapid growth of low-experience artists. The investment rating was maintained as 'Buy.'

Lee Seonhwa, a researcher at KB Securities, explained, "Given JYP Ent.'s high dependence on Stray Kids and the low contribution from low-experience artists, an increase in cost of sales due to Stray Kids' contract renewal in 2025 is inevitable. Therefore, operating profit estimates for 2024 and 2025 were lowered by 27.9% and 24.2%, respectively, which is the main reason for the target price downgrade. However, with increased activities from major artists starting in the second half of this year, leverage is expected to expand, and the debut of the LOUD project boy group will broaden the artist pipeline, so the investment rating is maintained."

JYP Ent.'s third-quarter performance this year is expected to meet market expectations. The researcher stated, "JYP Ent.'s consolidated sales for the third quarter are projected to increase by 13.1% year-on-year to 158 billion KRW, while operating profit is expected to decrease by 15.5% to 37 billion KRW, aligning with the consensus estimate of 38.8 billion KRW. Album sales volume reached 4.39 million units in the third quarter, leading to a 39.3% increase in album revenue. However, as artist activities increase, the cost ratio will rise due to content production expenses, and costs related to the launch of subsidiary Init Entertainment and the production of KBS's 'Ddan Ddara Show,' scheduled to air in November, will cause the operating profit margin to decline by 8.0 percentage points." He added, "In the fourth quarter, the world tour and special album sales of Stray Kids are planned, so a seasonal effect is expected."

This year, investment-related expenses increased due to JYP360's in-house production of MD and goods and the expansion of the 'Fans' fandom platform business area, while the leverage effect of high-experience artists was sluggish due to a decrease in Chinese album bulk orders. The researcher noted, "In 2025, cost burdens related to increased artist contract rates due to Stray Kids' contract renewal will rise, making rapid growth of low-experience artists essential. Therefore, the initial performance of the LOUD project and Project C boy groups, scheduled to debut around the end of this year to early next year, will be important triggers for the stock price."