[Click eStock] "NCSoft, Success of New Release is Key... Target Price Maintained"

Success of New Releases Key to Performance Recovery
Positive Fixed Cost Reduction Through Restructuring
Concerns Over Additional Downside Risk if New Releases Underperform

Hana Securities analyzed on the 21st that the future performance of new releases is the key to the stock price recovery of NCSoft, which has recently shown poor earnings. They maintained a 'Buy' investment rating and a target price of 230,000 KRW. NCSoft's closing price on the previous trading day was 215,000 KRW.

According to Hana Securities, NCSoft recorded consolidated sales of 401.9 billion KRW in the third quarter (a decrease of 5.0% year-on-year, an increase of 9.0% quarter-on-quarter) and an operating loss of 14.3 billion KRW, turning to a deficit. Although sales in the mobile segment grew compared to the previous quarter, the decline in sales of major games and increased marketing expenses led to the continued loss.

Mobile segment sales increased to 253.4 billion KRW (a decrease of 7.5% year-on-year, an increase of 16.1% quarter-on-quarter), with Lineage M notably achieving sales of 158.9 billion KRW (an increase of 48.5% year-on-year, 32.8% quarter-on-quarter), benefiting significantly from the Reboot World update. On the other hand, marketing expenses surged to 48.7 billion KRW (an increase of 75.9% year-on-year, 180.0% quarter-on-quarter) due to the poor performance of the new title Hoyun. Hoyun failed to gain significant market response due to positioning failure and has been included in the current restructuring targets, making it difficult to expect future earnings contributions.

NCSoft plans to globally launch the new title Journey of Monark on December 4. This is the first new release based on the Lineage intellectual property (IP) in three years and is expected to be an idle RPG targeting high ARPPU users. The company aims for initial sales of 39.9 billion KRW and 206.3 billion KRW in 2025. However, due to a lack of clan competition content, the revenue stabilization speed is expected to be faster downward compared to the existing Lineage IP.

Lee Junho, a researcher at Hana Securities, stated, "NCSoft announced plans to significantly reduce fixed costs from 2025 through intensive restructuring. While this appears to be a positive financial change, the suspension of multiple projects means that the performance of new releases will be a key variable in earnings recovery." He added, "If the revenue contributions from upcoming new titles including Journey of Monark, Tactan, Aion 2, and Breakers: Unlock the World exceed expectations, there is potential for an upward revision of the target price. The performance of new releases is crucial for future earnings and stock price recovery, and while cost reduction effects through restructuring are expected to be positive in the mid-to-long term, additional downside risks cannot be ruled out if new releases underperform."