Shinhan Investment Corp. said Studio Dragon is recently confirming the schedules for relatively large dramas smoothly, and it expects next year’s performance to recover significantly through strict production cost control. It maintained a target stock price of 56,000 won and suggested an 'expansion of holdings' opinion. The last closing price of Studio Dragon was 46,900 won.
Studio Dragon announced a production supply contract for the Netflix original "Slowly Yet Intensely" on the 17th of this month. This announcement is the first since "Mr. Sunshine" in 2018.
Ji In-hae, a research fellow at Shinhan Investment Corp., noted, “Typically, the supported production cost ratio for Netflix originals is around 110% to 120%,” adding, “Since it is large enough to be announced, the issue of increased production cost may be raised again, but considering the high number of episodes compared to general works, the per-episode production cost is expected to be fairly manageable.”
The research fellow said, “After securing intellectual property rights (IP), planning a model and advance sales, and evaluating various platforms, the highest revenue is expected when evaluating bidding rights amounts and practical profits, which led to the decision to proceed with Netflix original content.”
"Slowly Yet Intensely" is a drama written by Noh Hee-kyung, starring Song Hye-kyo and Gong Yoo. It deals with the rapidly growing show business world set in the 1960s broadcasting industry, telling the story of stage stars and those who create them. Studio Dragon has entered into a contract with Netflix until December 17, 2029, and performance metrics are expected to reflect revenues and expenses concurrently at the time of delivery.
Shinhan Investment Corp. anticipates Studio Dragon’s performance to gradually improve after the third quarter this year. Research fellow Ji said, “Although the number of productions has not increased significantly yet, there is little amortization expense in the fourth quarter, and the expense burden in the first quarter of next year will be light.”
He added, “Considering that the company's strict production cost control measures are maintained, and the planned general drama production costs have decreased by 10%, it is likely to enter a recovery phase in next year’s performance.”