HYBE(352820) set record second-quarter results on the back of BTS's world tour, but the stock plunged after the earnings release. Kiwoom Securities on the 29th called it an "excessive correction versus fundamentals," maintaining a Buy rating and a target price of 3.3 million won. HYBE's previous trading day closing price was 188,800 won.
The previous day HYBE said its second-quarter consolidation revenue was 1.45 trillion won and operating profit was 170.9 billion won. Those figures were up 105.5% and 159.4% year over year, respectively. They also beat market expectations across the board.
By business line, concert revenue jumped 243.3% year over year to 647.7 billion won, driving the improvement. The application of dynamic pricing to BTS concerts and a broad increase in ATP were the reasons. Album revenue was 326.8 billion won, meeting market expectations with total album sales of 11.32 million, including 3 million units of Cortiz. Merchandise (MD) revenue also more than doubled year over year to 310.6 billion won.
However, the second-quarter gross profit margin (GPM) fell to 32% from 43% in the prior quarter. Because the concert business has a high proportion of artist royalties, its relatively higher cost ratio meant that a greater share of concert revenue led to lower profitability. The increase in labor costs was also due to routine factors such as performance bonuses and global hiring, and there were no one-off expenses that damaged fundamentals.
As for the sharp drop in the share price after the earnings release, it was assessed as an excessive correction versus fundamentals. The analyst said, "With macro uncertainty from a market plunge and expectations centered on high-margin MD missing the mark as growth skewed toward concert-driven top line expansion, a classic 'sell on' pattern emerged."
The analyst added, "On the surface, the margin fell, but with ATP hikes, the absolute earnings power is actually strengthening," and said, "Even considering expense increases, the second-half operating profit forecast can be raised by 20 billion won from the previous view, and 2027 by 50 billion won."
The analyst continued, "The current share price has fallen to a level of 20 times the projected 2027 price-earnings ratio (PER), securing valuation downside rigidity," and said, "From 2027, tours by localized global IPs such as Cortiz and KATSEYE are expected to ramp up, making now an attractive buying opportunity."