Samsung Securities said on the 6th that SM Entertainment(SM Entertainment(041510)) beat market expectations in the second quarter and is expected to maintain growth in the second half on the back of expanded artist activity. However, while revising next year's earnings estimates, it maintained an investment opinion of BUY and lowered the target price to 105,000 won from 114,000 won. The previous session's closing price was 73,700 won.
Choi Min-ha, a Samsung Securities researcher, said, "Album and digital sales fell, but strong concert and MD/licensing sales and improved results at consolidation subsidiaries pushed second-quarter results above market expectations," and noted, "In the second half, whether aespa's world tour expands its Western fandom is the key variable for mid- to long-term earnings and valuation."
SM Entertainment's second-quarter consolidation-based revenue was 349.6 billion won and operating profit was 52.9 billion won, up 15.4% and 11.0%, respectively, from a year earlier. Album and digital sales fell 8%, but concert sales rose 24% and MD/licensing sales rose 22%, driving overall growth. However, as the share of performances by veteran artists such as TVXQ!, Super Junior, and EXO increased, the operating margin dipped somewhat to 18.2% from a year earlier.
Consolidation subsidiaries drove second-quarter results. Dream Maker's profitability improved thanks to expanded concert production and stronger collaboration with headquarters, and DearU's profit growth added to that, bringing combined operating profit at key subsidiaries to 13.0 billion won, up 61.2% from a year earlier.
Artist activity is expected to become even more active in the second half. In the third quarter, NCT 127, marking its 10th debut anniversary, will release a studio album and start a world tour. aespa, RIIZE, NCT WISH, and Hearts2Hearts, among other younger-year artists, will ramp up local promotions centered on releasing albums in Japan. In the fourth quarter, alongside NCT DREAM's studio album, solo and unit promotions by roster artists will continue, and a new boy band composed of some members of the publicly revealed male trainee team "SMTR25" is also set to debut within the year.
Researcher Choi said, "With younger-year artists successfully settling into the market, the next growth engine has been sufficiently secured," and added, "How much the Western fandom expands through aespa's world tour starting in August is an important variable for future results and corporate value."
However, Samsung Securities lowered its 2026 net profit estimate by 9% from the previous figure, reflecting currently confirmed activity schedules. Accordingly, it cut the target price by 8% to 105,000 won by applying a 12-month forward PER of 20 times, the average level of global peers.