[Click eStock] "SM Entertainment's Profits to Surge from Q2... Target Price Raised"

On May 8, Hana Securities raised its target price for SM Entertainment by 15% to 150,000 won, stating, "From the second quarter of this year, both performance and valuation are expected to improve due to the consolidation effect of DearU, the expansion of secondary copyright sales, and expectations for the easing of the ban on Korean content in China."

SM Entertainment's consolidated operating profit for the first quarter of this year was 32.6 billion won, a 110% increase year-on-year and significantly above market expectations. On a separate basis, operating profit was 41.3 billion won, with an operating margin of 24.9%. Revenue for the same period was 231.4 billion won, up 5% from the previous year. The company attracted a total audience of 930,000, including TVXQ's concerts in Japan and world tours by NCT127 and aespa. Album and digital music sales reached 67.8 billion won, a 23% increase year-on-year.

Researcher Lee Kihun explained, "Excluding the temporary impact of Chinese music sales reflected in the first quarter results, the performance appears to be in line with market consensus."

Annual operating profit for 2025 is expected to reach 152.9 billion won, a 75% increase from the previous year. Lee stated, "From the second quarter, the consolidation effect of DearU will be fully reflected, and with concentrated comebacks from aespa, RIIZE, and NCT Wish, performance improvement will become more evident." He also projected, "Mix improvement will be seen through the continued upward trend in MD and licensing sales since last year." In addition, the pre-debut promotions for the new boy group project 'SMTR25' and their planned debut next year are also expected to have a positive effect.

Lee further emphasized, "Considering the expansion of DearU in the Chinese market and the continuous growth of new IPs, operating profit is expected to surpass 180 billion won in 2026, which represents approximately double the profit growth compared to 2024." He added, "As activities of major IPs resume across the industry, sector valuation is rising, and SM Entertainment, along with HYBE, remains the top pick in the sector."