Heungkuk Securities said on the 23rd that while it expects YG Entertainment(122870)(YG Entertainment)'s second-quarter results to miss market expectations, concert momentum is likely to concentrate in the second half centered on Big Bang and BABYMONSTER. It maintained a "Buy (BUY)" rating but lowered the target price to 58,000 won from 80,000 won, reflecting adjustments to annual estimates and sector valuation.
Song Ji-won, an analyst at Heungkuk Securities, estimated YG Entertainment's second-quarter consolidation sales at 106.9 billion won and operating profit at 8.8 billion won. That is up 6.4% and 5.5%, respectively, from a year earlier, but operating profit would miss the market consensus of 9.6 billion won.
Song said, "BABYMONSTER's third mini album 'CHOOM (Dance),' about 810,000 copies, and Treasure's fourth mini album 'NEW WAV,' about 1.03 million copies, will be reflected, but due to the base effect of the first quarter's Blackpink third mini album 'DEADLINE' (about 2 million copies sold), results are expected to decline from the previous quarter."
It also saw the impact of Blackpink's tour ending and fewer concert dates reflected in the concert unit.
He said, "Treasure's 'PULSE ON' world tour in Southeast Asia, seven shows, the 'NEW WAV' fan concert in Korea, three shows, and BABYMONSTER's 'CHOOM' world tour in Korea, three shows, are slated to be reflected," adding, "With Blackpink's tour ended and fewer shows than a year earlier, results are expected to decline from the previous quarter and from a year earlier."
However, Heungkuk Securities focused more on the potential for second-half improvement than on the second quarter.
Heungkuk Securities projected richer performance momentum than in the first half as Big Bang's 20th anniversary world tour and new album release, BABYMONSTER's world tour, and Treasure's fan concert roll out from the third quarter.
In particular, it expected Big Bang's world tour to be the key driver of improvement.
Song said, "Big Bang's 20th anniversary world tour 'XX : COSMOS,' unveiled on June 11, is composed of 33 dates (with more to be added) with more than 40,000 attendees per show based on actual attendees, and, based on the schedule disclosed so far, we expect maximum capacity of about 1.74 million and about 1.3 million actual attendees."
He added, "Given that most dates for BABYMONSTER's world tour as well as Big Bang's are concentrated in the third and fourth quarters, we expect the MD unit to grow more than 140% in the second half from the first half in step with concert-unit sales."
A rookie boy group set to debut in the fourth quarter this year was also presented as a mid-to-long-term growth driver.
Song said, "The rookie boy group slated to debut in the fourth quarter is expected to reinforce the company's mid-to-long-term growth base, for which diversification of activity IP is urgent."
Heungkuk Securities forecast YG Entertainment's full-year sales at 600 billion won and operating profit at 74.8 billion won.
Song added, "We lower the target price to 58,000 won in line with adjustments to full-year revenue estimates and the sector average multiple."