[Click e-Stock] "DearU Set for a Surge of Positive Developments Starting in Q2"

On May 13, DS Investment & Securities analyzed that DearU is expected to benefit from a series of positive developments, such as its entry into the Chinese market, starting in the second quarter. The firm maintained its "Buy" investment rating and target price of 55,000 won.

DearU posted sales of 17.5 billion won and operating profit of 5.5 billion won in the first quarter. These figures represent decreases of 13.5% and 23.4%, respectively, compared to the same period last year. Kim Daesung, an analyst at DS Investment & Securities, stated, "The main reason for the decline in total subscribers by 20,000 compared to the previous quarter was the expiration of Blackpink Jisoo's contract and issues related to actor Kim Soohyun." He added, "The decrease in operating profit was influenced by the recognition of the remaining development costs for the AI Pet Bubble and an increase in selling, general, and administrative expenses due to employee bonuses."

The company expects performance to improve from the second quarter. DS Investment & Securities forecasts that DearU's sales and operating profit for this year will reach 91.2 billion won and 40.6 billion won, respectively, representing increases of 21.9% and 59.6% year-on-year. He explained, "All positive factors that will drive performance growth, such as the launch of the QQ Music service in China, the introduction of PG payment, and the onboarding of major IPs, are concentrated in the second quarter."

He added, "Although the launch of the Chinese service has been delayed due to server issues, it is scheduled to open normally in June. Upon launch, the expected number of new subscribers this year is 1.91 million, which, when converted to royalty revenue (10%), is expected to generate 5.8 billion won in profit."

He further emphasized, "PG payment is also scheduled to be introduced in June. Once implemented, the payment fee will be 5-6%, compared to the existing in-app fee of 26%. As a result, even if only 25% of all subscribers switch to this payment method by the end of the year, we can expect an improvement of about 6 percentage points in the operating profit margin."