Korea Investment & Securities Co. lowered its target price by 20% to 56,000 won from 70,000 won, saying the box office performance of new titles released this year by Netmarble(251270) fell short of expectations. It maintained a "buy" recommendation. Netmarble's previous closing price was 37,950 won.
Jeong Ho-yoon, an analyst at Korea Investment & Securities Co., said in a report on Aug. 6 that "for the recently weak share price to recover, fundamentally, the success of new titles needs to back it up."
Netmarble's revenue in the second quarter of this year was 749.2 billion won, up 4.4% from a year earlier. Operating profit was 80.1 billion won, down 20.8% over the same period, slightly below the market consensus of 86.1 billion won.
In the second quarter, "Mongil: Star Dive," "Game of Thrones: King's Road," and "SOL: enchant" were released, but their performance fell somewhat short of market expectations. Due to the impact of new launches, marketing expenses rose 35.5% from a year earlier to 183.5 billion won. With increases in labor costs and commissions as well, total operating expenses rose 8.5% to 669.1 billion won.
Plans for new releases in the second half were also adjusted. Netmarble had initially planned to unveil five new titles, but as first-half releases underperformed, it raised its internal review standards and cut the number of scheduled releases to three. In the second half, it plans to release "Solo Leveling: KARMA" and "Shangri-La Frontier," among others.
Jeong said, "Among the newly revealed titles, excluding 'Solo Leveling,' a verified intellectual property (IP), it is hard to have high expectations for box office success," adding, "it will be necessary to wait for additional new title disclosures going forward."
Starting in 2027, positive changes are expected on the expense side, such as lower Google fees, but the assessment is that cost savings alone are not enough to drive a rebound in the share price. In the end, the company needs to reprove the success of new titles along with stable revenue from existing games.
Korea Investment & Securities Co. lowered its 12-month forward controlling shareholders' net income estimate for Netmarble to reflect delays in new releases and diminished expectations for success. It also cut the applied price-earnings ratio (PER) to 15 times from 20 times.
Jeong said, "Since 2025, Netmarble has released multiple new titles, increased the success rate, and expanded profit size," adding, "to regain investors' attention, it needs to continue to show these results."