iM Securities said on the 13th that for JYP Ent. (JYP Entertainment), if the performance of lower-tenure groups' intellectual property (IP) is confirmed, a rerating of earnings and valuation is possible. It maintained a Buy rating and a target price of 100,000 won. JYP Entertainment's previous closing price was 71,900 won.
iM Securities explained that for JYP Entertainment, expenses have risen due to renewals with major artists, while earnings volatility is expanding as the sales mix shifts by business institutional sector.
In particular, the share of merchandise (MD) sales, which shows the highest correlation with operating profit, fell by 12 percentage points from a year earlier and by 14 percentage points from the previous quarter. The MD sales share in the third quarter was 17%.
Hwang Ji-won, an analyst at iM Securities, said, "This quarter, domestic management activities and new album releases were relatively concentrated," adding, "For domestic concerts and fan meetings, the structure requires directly bearing expenses, so profitability is limited."
It also noted that, excluding Stray Kids, there are no artists selling more than 1 million copies per album, and that production cost burdens continue.
Hwang said, "While the revenue contribution of lower-tenure groups is somewhat delayed, dependence on higher-tenure groups for results remains high," adding, "What matters in the long term is the growth of lower-tenure groups, and we need to watch whether NMIXX, which is planning a world tour next year that includes North America and Europe, visibly expands its global fandom."
In the fourth quarter, two domestic encore shows by Stray Kids will wrap up the large-scale stadium tour. This means a short-term earnings gap is inevitable, but stock momentum is expected to resurface when next year's activity plans become concrete.
TWICE is planning a tour of 35 shows across 20 regions, including major North American cities, next year. Hwang said, "It is worth noting the profitability improvement effect from strengthening the MD strategy."
It also projected that if the performance of lower-tenure IP is confirmed alongside the stable revenue contribution of higher-tenure groups, a rerating of earnings and valuation will be possible.
Meanwhile, JYP Entertainment posted sales of 232.6 billion won and operating profit of 40.8 billion won in the third quarter of this year. Sales rose 37% from a year earlier, while operating profit fell 16%.
iM Securities analyzed that in the fourth quarter, MD and licensing sales are expected to be strong thanks to TWICE's 10th-anniversary pop-up and collaborations such as Stray Kids with Bape.