On the 6th, Samsung Securities analyzed that DearU is experiencing delays in the entry of Chinese artists into the Chinese QQ Music Bubble service, causing a longer time for revenue improvement. Consequently, it has lowered the target stock price from the previous 72,000 won to 67,000 won while maintaining an 'overweight' investment opinion. The closing price of DearU on the previous trading day was 47,600 won.
In the second quarter of this year, DearU recorded consolidated revenues and operating profits of 20.2 billion won and 7.4 billion won, respectively. This is an increase of 5.8% and 5.5% compared to the previous year. However, due to significant non-operating expenses being reflected, it recorded a net loss of 6.6 billion won.
Choi Min-ha, a researcher at Samsung Securities, explained, "We applied a conservative asset evaluation standard and impaired the artist minimum guarantee (MG) advance cost, and it reflected exchange losses due to the decline in the won-dollar exchange rate."
Thanks to the entry of new artists like SME's RIIZE, NCT WISH, and Starship Entertainment's KiiiKiii, the average monthly subscriber count in Korea increased by 290,000 to 2.17 million compared to the previous quarter. As a result, it turned to net growth for the first time in six quarters, driving performance improvement.
However, the Chinese QQ Music Bubble service is still expanding its business gradually. It was incorporated in a tab format within the QQ Music platform on June 30, and initially, artists from SME, JYP, and CUBE Entertainment entered. On the 24th of last month, Korean artists were added in the second phase.
Researcher Choi noted, "As of the end of the second quarter, the number of artists currently servicing on DearU is confirmed to be 634, and about half of them are participating in the Chinese service as of August," adding that "the remaining artists will sequentially enter and start services in the future."
The entry of Chinese artists is delayed compared to initial expectations, but it is aimed to happen within the year. Researcher Choi stated, "Improvement in profitability is expected from the second half of the year," and added, "It is merely a matter of speed, but the direction of growth is clear."