HYBE(352820), despite posting the biggest quarterly results on record, is extending losses for a second straight day. Investors appear to be focusing more on weaker-than-expected profitability and concerns about a second-half earnings peak-out than on record-high revenue.
As of 9:31 a.m. on the 29th, HYBE was trading at 177,700 won on the main board, down 11,100 won (5.88%) from the previous session.
The previous day, HYBE also plunged 16.09% to close at 188,800 won, falling below the 200,000-won level.
HYBE disclosed the previous day that on a consolidation basis for the second quarter it posted revenue of 1.45 trillion won and operating profit of 170.9 billion won. The figures, up 106% and 159% from a year earlier, beat market expectations. Following the entertainment industry's first-ever simultaneous break above 1 trillion won in quarterly revenue and 100 billion won in operating profit, cumulative first-half revenue also surpassed 2 trillion won for the first time.
However, the securities industry said the market reacted sensitively to the possibility of profitability slowing despite the strong results.
Lee Hwajeong, an analyst at NH Investment & Securities, said, "Despite the earnings surprise, renewed concerns about profitability triggered an excessive share-price drop," and added, "Record-high topline growth is not being properly recognized by the market."
She added, "This year's expected price-earnings ratio (PER) of about 19 times is a historically undervalued range," noting, "Medium- to long-term growth drivers remain intact, including the expansion of Cortiz's fandom and global digital revenue growth centered on BTS and KATSEYE." However, reflecting the recent rise in market volatility, the target price was cut to 310,000 won from 330,000 won.
Korea Investment & Securities Co. also viewed the results themselves positively while pointing to a profitability burden from a higher share of concert revenue.
Jeong Hoyun, an analyst at Korea Investment & Securities Co., said, "The previous day's stock decline may partly reflect profit-taking after the results, but it also likely reflected concerns about a lower-than-expected operating margin."
In fact, second-quarter concert revenue surged 243.3% from a year earlier to 647.7 billion won on the back of BTS's world tour, and MD revenue jumped 103.1% to 310.6 billion won, both marking all-time highs. However, as the portion of concert revenue with a high artist allocation ratio increased, the operating margin came in at 11.8%, below the market consensus of 12.7%.
Jeong said, "Lower-vintage artists are growing faster than expected, which is positive in the long run for revenue diversification and profitability improvement," maintaining a "buy" rating, but lowered the target price to 330,000 won from 400,000 won to reflect a higher cost ratio stemming from a greater share of BTS concert revenue.