[Click eStock] "Performance Lacking Except Odin... Kakao Games Target Price Down"

Sluggish Performance Except for Odin...
Success of New Releases Holds the Key

Kakao Games is expected to see sluggish performance as sales excluding Odin remain weak.

On the 17th, Kiwoom Securities lowered Kakao Games' target stock price from 18,000 won to 15,000 won due to this background. The closing price the previous day was 13,120 won. The investment opinion was maintained at 'Outperform' (exceeding the market average return, between buy and neutral).

First-quarter earnings this year are expected to show sales of 133.1 billion won and an operating loss of 6.5 billion won. Compared to the same period last year, sales are expected to decrease by 25.4% and turn to a loss. It is anticipated that performance will be weak as sales of major games excluding Odin decline. Since significant efficiency improvements have already been made in major expenses such as labor costs and marketing expenses, meaningful performance improvement through cost efficiency alone is difficult.

Annual performance is expected to show sales of 721.8 billion won and operating profit of 65.2 billion won. Compared to the same period last year, sales are expected to increase by 15.1% and operating profit by 241%. However, the success of major new releases, Gadis Order (3rd quarter) and Project Q (4th quarter), is expected to be the key to performance improvement. Negative factors include a net loss of 10 billion won reflected due to the classification of Kakao VX as discontinued operations. This year’s performance is expected to be determined mainly by the contribution of Lionheart Studio, the developer of Odin.

Jingu Kim, a researcher at Kiwoom Securities, explained, "Chrono Odyssey, scheduled for release in the fourth quarter this year, has not yet been reflected in the earnings estimates, but if meaningful results are added, a certain level of buffer can be secured."