Shinhan Investment & Securities said on the 21st that multiple intellectual properties (IP) are stably supporting earnings for SM Entertainment(041510) and projected record-high results in the second quarter. It maintained a "buy (BUY)" rating.
However, reflecting a decline in valuations across the entertainment sector and supply-demand pressure, it lowered the target price to 110,000 won from 130,000 won.
Ji In-hae, an analyst at Shinhan Investment & Securities, projected, "SM's second-quarter consolidation revenue will be 348.2 billion won and operating profit 54 billion won, marking a record-high revenue that exceeds market expectations."
It cited balanced growth in album sales, concerts, and the merchandise business as the backdrop for strong results. It estimated second-quarter album sales at about 5.88 million units, concert attendance at 960,000, and the number of shows at 70.
By artist, it analyzed that NCT WISH contributed about 1.9 million units, RIIZE's mini-album 1.4 million units, and Hearts2Hearts 600,000 units to results. aespa supported results with 1 million units of a full-length album and concerts, while legacy IP such as EXO, TVXQ!, and Super Junior also continued large-scale concerts, underpinning performance.
The analyst said, "Global IP, legacy IP, and early-year IP delivered results simultaneously, showing an ideal portfolio."
However, it forecast that activity intensity could ease somewhat in the second half compared with the first half. While NCT 127's comeback and aespa's global tour starting in the third quarter will partly offset results, it said schedules could be adjusted somewhat after the activity concentrated in the first half.
Instead, it projected that the new boy group "SMTR25," slated to debut in the second half, will serve as a key momentum.
Shinhan Investment & Securities lowered its target price by 15% to 110,000 won from 130,000 won. It cut this year's earnings estimate by about 9% and, reflecting a decline in valuations across the entertainment sector, investor sentiment, and supply-demand conditions, adjusted the applied price-earnings ratio (PER) to 19.4 times, 10% lower than before.
The analyst said, "Considering stable results based on multiple IPs and strong momentum for a new debut, the current PER of 11 times remains attractive," adding, "We maintain a buy view."