[Special Stock] 'Earnings Improvement' DearU Surges Over 8%

DearU shares are showing strong performance, supported by improved earnings driven by a recovery in subscriber numbers.

As of 11:17 a.m. on August 6, DearU was trading at 51,800 KRW, up 4,200 KRW (8.82%) from the previous trading day.

On this day, IBK Investment & Securities maintained its "Buy" rating and target price of 67,000 KRW for DearU, stating, "At the end of April, the entry of RIIZE and NCT WISH led to a recovery in subscriber numbers, resulting in improved earnings."

In the second quarter, DearU reported sales of 20.2 billion KRW (up 5.8% year-on-year and 15.0% quarter-on-quarter) and operating profit of 7.4 billion KRW (up 5.4% year-on-year and 27.7% quarter-on-quarter), with an operating margin of 36.9%.

Kim Yoo-hyuk, a researcher at IBK Investment & Securities, said, "The main factor behind the improved results was the average monthly subscriber count, which increased by 15.4% to 2.17 million from 1.88 million in the previous quarter." He added, "After recording an average of 2.3 million monthly subscribers in the first quarter of last year, the number had declined for four consecutive quarters, but has now recovered to the 2 million range."

Kim also commented, "DearU is improving its profit structure by expanding royalty revenue through the launch of the Bubble service in China and reducing payment fees by introducing a payment gateway (PG) system." He projected, "Among Tencent Music (TME) paying customers, 300,000 to 400,000 per quarter are joining Bubble, and the PG payment conversion rate is expected to reach 30% by the end of this year and 40% by the end of next year."

He recommended that the recent share price decline be seen as an opportunity to increase holdings. Kim stated, "We continue to present DearU as a second-preferred stock in the sector," and analyzed, "Despite ongoing efforts to improve the profit structure and increasing earnings visibility, the price-earnings ratio (PER) for next year has been adjusted down to the 20x level seen three months ago."