[This Week's Stocks of Interest] HYBE: BTS Comeback and Hallyu Ban Lifting Expectations

First Quarter Performance Adjusted Due to Artist Off-Season
"Temporary Adjustment... Performance Improvement Expected with Comebacks and Tours This Year"

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Amid concerns over U.S. President Donald Trump's tariff policies and potential threats to the independence of the Federal Reserve, investors are turning their attention to "entertainment stocks," which are considered classic defensive stocks. In particular, global comprehensive entertainment company HYBE has seen its share price fluctuate around 230,000 won recently, an increase of about 18% compared to the beginning of the year. However, due to weak first-quarter earnings forecasts, the price has dropped somewhat from the 260,000 won level at the end of February. In the securities industry, expectations for the return of HYBE’s major artists, including BTS, starting in the second half of the year, as well as the lifting of the Hallyu Ban (Hanhanryeong) in China, are anticipated to be key drivers for further share price growth.

Unrivaled Multi-Label System... Solid Business Structure with Platforms Like Weverse

HYBE originated from Big Hit Music, founded by Chairman Bang Si-hyuk in 2005. What sets it apart from other entertainment companies is its "multi-label" system. With the goal of reducing dependence on specific artists or labels and encouraging both competition and collaboration, HYBE has acquired 12 domestic and international labels, including Pledis, Source Music, ADOR, KOZ Entertainment, U.S.-based Ithaca Holdings, hip-hop label QC Media Holdings, and Latin label Exile Music. Each label handles practical matters such as album production and marketing, while HYBE oversees trainee management and non-production operations.

The business structure is largely divided into three areas: ▲music labels ▲IP (intellectual property) related businesses ▲platforms (fan communities, e-commerce). According to NH Investment & Securities, HYBE’s consolidated revenue breakdown last year was 38% from albums and digital music, 20% from concerts, 19% from MD (merchandise) and IP licensing, and 12% from content.

Group BTS member Jimin received the "K-pop Song of the Year" award for his solo second album title track "Who" at the 2025 iHeartRadio Music Awards held in Los Angeles, USA, the 2025 iHeartRadio Music Awards announced on the 18th of last month. Yonhap News

Additionally, the global fan platform Weverse has steadily expanded its paid services, such as memberships and DMs (direct messages), improving profitability. Even during the BTS members' military service, Weverse has enabled continuous fan management, minimizing fanbase attrition. Recently, HYBE has also brought in a variety of external artists, further expanding the platform’s influence. Jang Ji-hye, a researcher at DS Investment & Securities, stated, "HYBE has established an internalized business structure encompassing planning/production, performances, and the fan platform Weverse," adding, "It is maximizing revenue per IP through global tours, merchandise, and fan platform services, and is expanding into areas beyond music, such as gaming."

However, many expect HYBE’s first-quarter performance this year to fall short of market expectations. Kim Hyun-yong, a researcher at Hyundai Motor Securities, said, "HYBE’s first-quarter results are expected to show sales of 486 billion won and operating profit of 21.9 billion won, representing increases of 34.7% and 52.3%, respectively, compared to the same period last year," but added, "This is expected to be less than half the market consensus." He explained, "Although concert attendance increased by 580,000 year-on-year, driving company growth along with MD and licensing, the profitability of rookie performances and fan meetings for BoyNextDoor, TWS, and &TEAM was low, resulting in a weak operating margin of 4.5%."

Lee Hyun-ji, a researcher at Eugene Investment & Securities, said, "In the first quarter, sales are expected to reach 429.3 billion won with operating profit at 27.5 billion won, falling below market expectations," adding, "Due to the absence of major artist comebacks, album sales will likely decrease year-on-year. While performances by J-Hope, Seventeen, and Tomorrow X Together (TXT) have been active and driven the top line, we have lowered our profit outlook to account for increased costs from changes in sales composition."

Major Artist Comebacks Begin in Q2... Hallyu Ban Lifting in China Also a Key Investment Point

From the second quarter onward, robust earnings growth is expected as major artists make their comebacks. The event most anticipated by the market is the full-group comeback of BTS, but starting with J-Hope, Jin’s solo concert in the second quarter is also reflected, ensuring that solo activities by members will continue throughout the year without interruption. The strong growth of Seventeen and Enhypen, both of whom are steadily proving their expanding fandom in the U.S., is also encouraging.

Researcher Lee Hyun-ji said, "Most artists are set to make comebacks in the second quarter," adding, "In particular, starting with J-Hope’s concert, Weverse’s monthly active users (MAU) are trending upward again. Membership subscriptions are also increasing sequentially, and with the full-group comeback of BTS, we expect to see visible improvements in key metrics such as Weverse traffic and subscriptions."

The intensifying U.S.-China trade conflict itself is a positive factor for the K-pop sector. Sunhwa Lee, a researcher at KB Securities, stated, "As the U.S.-China conflict escalates, K-pop entertainment stocks, which are free from the impact of U.S. tariffs and can benefit from improved relations and cultural exchanges with China, deserve attention. Signs of the Hallyu Ban being lifted are already evident. This year, NCT WISH held a press conference for Chinese media in Shanghai as a pre-promotion for their new album, and SM Entertainment, marking its 30th anniversary, collaborated with Tencent Music to hold offline events in Beijing, Shenzhen, and other cities."

Researcher Jang Ji-hye said, "There is growing anticipation for the resumption of Korean content distribution in China. Amid deepening U.S.-China tensions, distributing Korean content in China can simultaneously address China’s top economic priority of boosting domestic demand and improving relations with neighboring countries," adding, "Although uncertainties remain high, if the Hallyu Ban is lifted, the entertainment sector is expected to see profit growth through expanded IP leverage from increased concerts and activities in China."

The recent overall rise in entertainment stocks could become a valuation burden. There are also concerns that the growth in concert revenue has already been priced in. Regarding this, Sunhwa Lee pointed out, "This is the first time mega IPs such as BTS have entered a full-fledged world tour phase since COVID-19, making it difficult to estimate guarantee amounts. Since the artist revenue share ratio has increased after contract renewals, it is also hard to estimate profitability, so the contribution of concert activities to profits may be lower than expected," adding, "It is true that concert profitability is lower than that of albums."

Nevertheless, "as the value of artist IP increases, guarantee amounts have risen compared to the past, audience numbers are growing, and additional sponsor revenue is being generated," she emphasized. "With economies of scale, the size of concert venues is expanding, creating operating leverage effects. The simultaneous rise in highly profitable merchandise sales is also an important investment point."