[Click eStock] "SM, Expecting Rookie Momentum Following Surprise Earnings"

Target Price Raised from 110,000 Won to 120,000 Won

Kiwoom Securities raised the target price for SM from the previous 110,000 won to 120,000 won on the 11th, stating that following the surprise performance in the fourth quarter of last year, the company is expected to maintain its growth trend in 2025, supported by the reinforcement of its rookie lineup. The investment opinion was maintained as 'Buy.'

SM recorded an operating profit of 33.9 billion won on a consolidated basis in the fourth quarter of last year, a 275.6% increase compared to the same period the previous year. During the same period, sales increased by 9% to 273.8 billion won, and net loss decreased to 24.1 billion won, less than half of the previous year's figure. Regarding this, Namsoo Lee, a researcher at Kiwoom Securities, explained, "Despite a decrease in physical album sales in the fourth quarter, growth in concerts, performances, and merchandise (MD) was remarkable," adding, "The increase in MD sales and the recognition of performance-based bonuses led to simultaneous efficiency improvements in production costs and selling and administrative expenses, resulting in operating profit growth."

Along with the reinforcement of rookie artists, growth in the concert sector this year is also an expected factor. Researcher Lee emphasized, "With the addition of aespa, the world tour lineup has expanded, and the male rookie group is increasing its presence in Asia and Japan," highlighting, "This is a point where the simultaneous growth of concert MD and planned MD can be anticipated." On the 24th, SM will debut the female rookie group HATSU2HATS, their first in five years since aespa, with the single 'The Chase.' Last month, to celebrate its 30th anniversary, SM unveiled SMTR25, composed of 25 male trainees, raising expectations for new intellectual property (IP).

Researcher Lee projected, "With an increase in active artists, overcoming the album base, and growth in music and world tour performance due to global expansion," forecasting SM's 2025 sales to increase by 11.9% year-on-year to 1.1075 trillion won, and operating profit to rise by 54.8% to 135.6 billion won.