Krafton Plummets 14% Despite Record-Breaking Earnings... "New Releases Must Succeed to Survive"

First Annual Sales Surpass 2 Trillion Won and Operating Profit Exceeds 1 Trillion Won Last Year
Stock Price Plunges 14% Amid Skepticism Over New Game Success

Krafton, which achieved record-breaking performance last year, has once again entered a period of proof. Although it succeeded in joining the '2 trillion won club' in annual sales thanks to the hit of its flagship game 'Battlegrounds,' the stock price has slumped due to the absence of a next-generation title to sustain growth. Attention is focused on whether Krafton will demonstrate that its growth potential remains intact through upcoming new releases.

Previously, Krafton recorded its highest-ever figures last year with consolidated annual sales of 2.7098 trillion won and operating profit of 1.1825 trillion won. For the first time since its founding, both sales and operating profit surpassed the 2 trillion won and 1 trillion won marks, respectively. The driving force behind this record was 'PUBG: Battlegrounds,' a global hit that has become synonymous with survival games and surpassed a peak concurrent user count of 890,000 last year.

However, the market's response was cold. According to the Korea Exchange on the 12th, Krafton's stock closed at 322,500 won, down 14% from the previous day. After hitting a 52-week high of 390,000 won during trading on the 10th, the stock has declined for three consecutive trading days. Related exchange-traded funds (ETFs) such as KODEX Game Industry (-5.80%), HANARO Fn K-Game (-6.34%), and TIGER Game TOP10 (-5.17%) also plunged one after another. Since the beginning of this year until the 11th of this month, individuals had net sold 109.3 billion won worth of shares while foreigners and institutions were buying, but on the previous day, even foreigners and institutions sold 70.5 billion won and 63.7 billion won respectively, ranking second in net selling.

The background to the stock price weakness is interpreted as skepticism about whether Krafton's growth momentum can continue. Kang Seok-oh, a researcher at Shinhan Investment Corp., said in a report yesterday, "Battlegrounds maintains steady traffic, so stable sales are expected in the future," but added, "Since development and publishing capabilities through new titles have not been proven beyond Battlegrounds, valuation expansion is difficult," and downgraded the investment opinion. It is pointed out that the price-to-earnings ratio (PER) of about 20 times limits the stock price's upside potential in a situation where additional large intellectual property (IP) comparable to Battlegrounds has not yet been secured.

Krafton is also concerned about breaking away from excessive dependence on Battlegrounds. Kim Chang-han, CEO of Krafton, stated at the earnings conference call on the 11th, "The growth of Krafton's core business, the game business, ultimately depends on securing big franchise IP," and revealed an ambition to invest up to 1.5 trillion won in new title production costs over the next five years to achieve 7 trillion won in sales. Of the 7 trillion won, 60% is expected to come from Battlegrounds and 40% from new IPs.

In the securities industry, there is an expectation that the performance of the new game 'INZOI,' scheduled for release (early access) on the 28th of next month, will be a turning point. Kim Hyun-yong, a researcher at Hyundai Motor Securities, said, "Starting with INZOI, four self-developed titles including Dark and Darker Mobile, Subnautica 2, and Ding Come Together are scheduled for release in 2025," and explained, "INZOI, which is entering the life simulation game sector that has experienced a gap since the 'Sims' series, is currently ranked 5th on the Steam wishlist, continuously attracting user interest."

INZOI is also a testing ground to gauge whether the CPC (Co-Playable Character), which Krafton is focusing on, can become a 'game changer.' Unlike existing NPCs (Non-Player Characters) that act only according to given scenarios, the CPC, jointly developed by Krafton and NVIDIA, is a character that can flexibly communicate and cooperate with users. CEO Kim recently met with Sam Altman, CEO of OpenAI, who visited Korea, to discuss collaboration on CPC development.