Yuanta Securities Korea said on the 9th that while SME's fourth-quarter results last year are expected to fall short of market expectations, investment appeal has risen ahead of major momentum, including the possible lifting of the ban on the Korean wave this year and key artists' comebacks. Accordingly, it maintained a Buy rating and raised its target price to 140,000 won from 130,000 won. SME's closing price in the previous session was 117,900 won.
Lee Hwan-uk of Yuanta Securities Korea said, "In the fourth quarter of 2025 on a consolidation basis, revenue will be 290.5 billion won, up 6.1% from a year earlier, and operating profit will be 37.7 billion won, up 11.3%." However, that is below market expectations of 315.1 billion won in revenue and 45.3 billion won in operating profit.
The shortfall versus expectations was attributed to a decline in album sales, a high-margin revenue source, and higher concert cost burdens. However, backed by strong merchandise (MD) sales, the company is still expected to sustain year-over-year improvement.
By segment, in the album and digital music segment, fourth-quarter total album sales were estimated at about 2.95 million units, including NCT Dream (1 million), Riize (700,000) and Hearts2Hearts (450,000). While sales of some artist IPs underperformed market expectations due to negative growth, analysis suggests this stems more from diversified consumption than from a shrinking fandom. In fact, digital music revenue has remained solid at around 25 billion won per quarter, and MD revenue is also strong.
In the concert segment, total attendance is expected to grow year over year to about 900,000, including eight NCT Dream Asia tour shows, 16 NCT Wish shows, 13 aespa shows and seven Riize shows. However, compared with the previous quarter, the improvement is expected to be limited as the share of smaller offline events such as fan concerts and North and South America tours increased.
In the MD segment, strong sales of tour MD and season's greetings and the inclusion of results from character and IP collaboration products are expected to drive steep growth both year over year and quarter over quarter.
The analyst said, "This year, with the reemergence of momentum around the lifting of the ban on the Korean wave, EXO's comeback, the rapid monetization of early-year IPs such as Riize, NCT Wish and Hearts2Hearts, the debut of one rookie boy group, and high growth at consolidation subsidiary DearU, the contribution to earnings will expand," adding, "This is a phase where mid- to long-term investment appeal stands out."
Lee added, "At present, the share price trades at about 18 times the 12-month-forward price-earnings ratio (PER), so valuation pressure is not heavy," and "the momentum around China lifting the ban on the Korean wave will be a factor lifting the annual floor for the share price."