Korea Investment & Securities Co. on the 24th analyzed DearU, saying that as fan culture becomes more important in the entertainment industry, revenue through related business models will increase. It initiated coverage with a Buy rating and a target price of 48,000 won. DearU's closing price in the previous session was 32,850 won.
DearU is a mobile application developer and operator that runs the global fan communication platform "DearU bubble."
Korea Investment & Securities Co. described DearU as "the key puzzle of K-pop," assessing that revenue will increase going forward centered on fan club culture and related businesses.
Jeong Ho-yoon, an analyst at Korea Investment & Securities Co., said, "The root of the entertainment market starts from fans' attachment to artists," and analyzed, "High growth in business divisions such as DearU's merchandise (MD), fan clubs, and platform royalties shows that the importance of fans in the industry is steadily rising."
In the fourth quarter last year, revenue increased due to subscription fee hikes and a stronger exchange rate. Jeong said, "The effect of the roughly 11%–12% subscription fee increase implemented in the third quarter was reflected, and the positive impact of the exchange rate rise was also reflected, with revenue growing 33.9% year over year to 23.8 billion won."
Drivers for future revenue growth also remain. Jeong said, "Starting this year, the number of artists onboarding the 'QQ Music' bubble, launched in partnership with Tencent Music (TME) in China, is increasing, and a resulting rise in subscribers is expected," adding, "China had the highest subscriber share even on the existing bubble service, so with more Chinese artists joining, the QQ Music bubble is expected to see subscriber and revenue growth."
Improvements in the cost structure and diversification of revenue models are also positive for revenue expansion. DearU launched the bubble web store last year and is rolling out subscription products such as artists' handwritten fonts.
Jeong said, "For the app, a 30% fee must be paid to Google and Apple, but the web store incurs only payment gateway (PG) fees, so as the share of web store usage increases, profitability is expected to improve," adding, "New businesses that can raise average revenue per user (ARPU), such as the 'bubble font and digital MD business,' a subscription product for artists' handwritten fonts, are also being expanded."