[Click eStock] "YLab, Profit Improvement Expected Next Year"

Korea Investment & Securities analyzed on the 17th that YLAB is expected to see profit improvement next year due to lower cost ratios, increased sales revenue, and royalty income. However, the investment opinion was presented as 'Not Rated.'

YLAB is a webtoon production company in which Naver Webtoon and CJ ENM each hold a 9.3% stake. Through a business structure where the company directly owns the IP of its works, it has secured one of the largest numbers of webtoon copyrights and business rights in Korea. It generates revenue by distributing self-produced webtoons on webtoon platforms such as Naver Webtoon and Kakao Page.

Additionally, it is developing various related businesses utilizing its IP. Representative examples include licensing and royalty income from the production of video content such as dramas and movies, as well as the release of games, music, and MD products. The cumulative sales by business segment for Q3 this year are composed of △ webtoon production 6.4 billion KRW (37%), △ video production 8.3 billion KRW (49%), △ webtoon localization 1.5 billion KRW (9%), and △ webtoon education 700 million KRW (4%).

YLAB’s cumulative sales for Q3 this year recorded 17.1 billion KRW, a 26.1% increase compared to the same period last year, with an operating loss of 6.8 billion KRW (continuing deficit).

Kang Si-on, a researcher at Korea Investment & Securities, explained in a report released that day, "The webtoon segment released 10 new titles last year and 11 cumulative titles this year, but completed works mainly with low sales contribution, resulting in a 10.3% decrease compared to the same period last year." He added, "On the other hand, video production grew 96.2% as sales from ‘Study Group’ production were supplemented by new sales from ‘Good Competition’ starting in Q3."

Operating profit saw an expanded deficit due to continued cost burdens. Researcher Kang said, "The cumulative cost ratio for Q3 reached 96.7%," adding, "The main causes of the high cost structure are labor costs from directly employing webtoon artists and fees paid for outsourced production and personnel."

He positively evaluated YLAB’s recent efforts to improve the cost ratio. According to Kang, the reason for establishing the Vietnamese subsidiary ‘YLAB VINA’ in May this year was also to reduce labor costs.

He stated, "The strategy is to lower webtoon production costs and strengthen production capacity by utilizing Vietnam’s low labor costs. Since establishment, local hiring and training have been conducted, and production division has begun for some works, so cost reduction effects can be expected next year."

He continued, "Furthermore, since sales revenue (third-party sales of works) and IP royalty income do not incur additional cost burdens, expanding their sales proportion is positive for profit improvement."