[Click eStock] "YG Continues Surprise Earnings Streak Even Before BLACKPINK's Tour"

On August 11, Hana Securities raised its target price for YG Entertainment from 120,000 won to 130,000 won, stating that, similar to SM, YG has continued to deliver surprises in its music and merchandise (MD) sales segments. The company also noted that this momentum is expected to accelerate further in the second half of the year as BLACKPINK's world tour is reflected in the results. The investment opinion was maintained as 'Buy'.

YG has posted 'surprise earnings' for three consecutive quarters. In the second quarter, revenue and operating profit reached 100.4 billion won (up 11% year-on-year) and 8.3 billion won (a turnaround to profit), respectively, once again exceeding the market consensus of 3.4 billion won. Lee Kihun, a researcher at Hana Securities, commented, "Even though there was no new album release, music sales exceeded the first quarter by 4 billion won, which is attributable to the rapidly increasing contribution from Babymonster," predicting even steeper monetization going forward.

Lee also stated, "On the cost side, although about 1.3 billion won in production costs related to Treasure was deferred to the second quarter, the cost structure has actually improved. This is due to performance leverage generated by the success of rookie groups." He further emphasized, "The most important point is that results from BLACKPINK's tour have not yet been reflected, which serves as a basis for even higher expectations for the second half."

YG's highest-ever MD sales were recorded in 2023, when BLACKPINK's world tour took place, reaching approximately 78 billion won for the year and an average of 19.5 billion won per quarter. In the most recent three quarters, average MD sales were 22.7 billion won, achieved without a BLACKPINK tour. Lee noted, "In the third quarter, BLACKPINK will hold 15 stadium tour concerts in Korea, the US, and Europe. The largest pop-up store will be held in five cities in China, including Beijing and Shanghai, for about four weeks starting in August." He predicted, "The second half is expected to see record-breaking MD sales, and with comeback releases from BLACKPINK, Babymonster, and Treasure each once, operating profit could approach the historical quarterly record of 36.5 billion won set in 2023."