[Click eStock] "DearU, Earnings Expectations with Collaboration with China's Tencent"

On the 16th, Korea Investment & Securities expressed high expectations for performance due to collaboration with China's Tencent regarding DearU and recommended buying on dips. No investment opinion or target price was provided.

DearU announced a partnership agreement with Tencent Music Entertainment (TME) on October 28. Users of TME's music streaming platform QQ Music can use DearU's Bubble within the app.

Researcher Ando Young said, "We believe TME chose to collaborate with DearU as a means to quickly improve user metrics amid stagnant revenue growth. In other words, this should be viewed from the perspective of securing K-pop intellectual property (IP) and introducing new business models (BM)."

Researcher Ando explained, "The potential number of subscribers that can be attracted through K-pop IP is 2.4 million, with an estimated annualized royalty revenue of 13 billion KRW. This is based on 690,000 Bubble China iOS subscribers and applying a 78% Android user ratio in China."

He added, "Furthermore, local IP entry in China will lead to a larger influx of users. Considering the 120 million paying users across TME's three streaming apps, an influx rate of 1-3%, and assuming 1.6 subscriptions per person as in Korea, the potential subscriber count ranges from 1.9 million to 5.8 million, with annualized royalty revenue estimated between approximately 10 billion KRW and 31 billion KRW."

He continued, "The consensus operating profit for this year is 28.2 billion KRW, and the profit contribution from the China service will be significantly large compared to existing profits. The proportion of Bubble subscriptions relative to the total domestic music platform users is about 3.5%, and TME's music platform holds about a 60% market share in China, so users from other platforms can also be attracted," he added.