[Click eStock] Krafton Set to Enter Peak Season Despite Weak Earnings

On January 7, Daishin Securities lowered its target price for Krafton from 410,000 won to 370,000 won, reflecting a downward revision of PUBG's revenue estimates due to anticipated weak fourth-quarter results. The investment opinion was maintained as 'Buy'.

Krafton's fourth-quarter revenue for last year is estimated at 921.2 billion won (up 49% year-on-year), with operating profit at 83.8 billion won (down 61%). While the consolidation of ADK Group's results from the fourth quarter is expected to push revenue above market expectations, operating profit is likely to fall short due to a decline in PUBG revenue and approximately 80 billion won in one-off expenses.

Lee Jieun, a researcher at Daishin Securities, stated, "PUBG's Steam traffic decreased by about 36,000 compared to the previous quarter, and its average revenue ranking in the fourth quarter was 14th, the lowest in the past two years. While the Porsche collaboration update in November had a significant impact, the content updates in October and December appear to have been less effective." In China, mobile revenue rankings continue to decline due to the off-season and competition from rival titles, and global regions are also expected to see quarterly revenue declines due to seasonal factors.

Although last year's fourth-quarter performance is expected to be somewhat weak, a rebound is anticipated in the first quarter of this year, which is traditionally the peak season. In particular, major anticipated titles such as 'Subnautica 2', 'PUBG: Black Budget', and 'Palworld Mobile' are scheduled for release in the second half of the year. Subnautica 2 currently ranks first on the Steam wishlist, with around 250,000 followers, generating significant expectations.

Lee added, "There is a higher likelihood that both earnings improvement and momentum from new releases will become more prominent toward the end of the first half rather than at this moment. The company is also likely to announce shareholder return policies such as share buybacks when it releases its fourth-quarter results, which should help mitigate some of the share price volatility stemming from PUBG's performance."