Eugene Securities noted on the 13th that improvements in performance are expected due to sales growth from new business for DoubleU Games. The firm also presented a 'buy' investment opinion and raised the target price from 67,000 won to 69,000 won. The closing price for DoubleU Games on the previous trading day was 47,600 won.
On the same day, Jeong Hee-hoon, a researcher at Eugene Securities, said, "Super Nation, which was included in the fourth quarter of 2023, achieved a remarkable 56% sales growth compared to the previous year," adding that, "The first quarter of this year (January to March) is also expected to achieve maximum sales." He also expected that DoubleU Games will record a 7% profit growth this year.
He continued, "Paxygames, which will be included this month, is also currently renewing its monthly sales record and is expected to generate over 10 billion won in sales on a quarterly basis starting from the second quarter (April to June)," analyzing that sales are expected to increase more rapidly with the launch of new products in the second half.
With an increasing proportion of consumer direct sales (DTC) from the beginning of the year, the proportion of platform expenses against sales is expected to decrease. Researcher Jeong noted, "DTC grew from around 6% in the first half of last year to nearly 10% in the second half," and added, "This year, we will focus on expanding DTC sales not only for the key game Double Down Casino (DDC) but also for the game DoubleU Casino (DUC)." Considering that competitors have a DTC share exceeding the mid-20% range, Jeong explained that a significant increase in profit margin is anticipated.
The exchange rate of the won to the dollar, which has been soaring since the beginning of the year, is also a positive factor for DoubleU Games, as most of its sales are recognized in dollars. He stated, "DoubleU Games holds a considerable portion of its cash, amounting to about 820 billion won, in dollars, so non-operating profit will also be significantly reflected in the first quarter."
Researcher Jeong said, "Due to the decline in stock prices since the beginning of the year, DoubleU Games' price-to-earnings ratio (PER) has fallen to 5.5 times this year, which is low considering both growth potential and profitability, so I recommend buying the stock."
DoubleU Games' revenue and operating profit for 2024 grew by 10% and 17%, respectively, compared to the previous year. Researcher Jeong observed, "Excluding the effects of the acquisition of the subsidiary Super Nation last year, the growth was limited to 1%," and added, "Growth in the social casino market has slowed down, which has also hampered the company's growth." Nevertheless, he noted that despite limited growth, profit growth was achieved through the efficiency of marketing expenses.
However, he added that this year's stagnation in the social casino market growth rate is expected to remain flat. There is little chance that the structural characteristics of the business will change, and there is not much capacity for significantly outperforming market growth. Researcher Jeong remarked, "The additional reduction in marketing expenses that was the basis for profit increase until last year has become difficult."