Studio Dragon released results that fell short of market expectations, prompting securities firms to lower their target prices in quick succession.
On the 7th, DB Securities cut its target price for Studio Dragon by 11% to 58,000 won from 65,000 won. It returned to profit, but profitability deteriorated.
In the third quarter this year, Studio Dragon posted revenue of 136.5 billion won, up 51.2% from a year earlier, and operating profit of 10.5 billion won. Operating profit fell short of the market consensus of 15.6 billion won.
Shin Eun-jung, an analyst at DB Securities, said, "A total of 72 episodes, including 'Gyeonwoo and the Fairy,' 'First Love,' 'The Tyrant's Chef,' 'My Husband's Marriage Contract,' 'It Shall All Come True,' and 'The Manipulated,' were reflected in the results," adding, "The reason for the weak results is that recognition of 'Dear X' and 'Hatsukoi Dogs' was pushed to the fourth quarter this year, and profitability worsened as 'First Love' suffered low ratings."
Hana Securities also lowered its target price the same day by 8% to 54,000 won from 59,000 won. Lee Gi-hoon, an analyst at Hana Securities, said, "Although weak results continue due to reduced scheduling, recent content performance has been reaffirmed," adding, "Next year should finally see an expansion in scheduling."
In the fourth quarter this year, Studio Dragon scheduled 66 episodes of its productions, and major titles such as 'Typhoon Family,' 'Nice to Not Meet You,' and 'Pro Bono' secured pre-sales to Netflix and Amazon. Hana Securities estimated that, if there are no one-off expenses, operating profit could come in around 16 billion won, as originals like Dear X will also be reflected in results.
The analyst said, "Beyond expectations for one U.S.-bound series order, scheduling is set to expand with increased slots in Japan and the revival of Wednesday-Thursday drama, allowing a recovery to prior profit strength (about 50 billion won)."
He added, "We expect additional declines to be limited, and around Dec., when next year's scheduling becomes more concrete, expectations for a turnaround could be reflected in the share price."