Samsung Securities said on the 8th that SM Entertainment(041510) will continue to structurally level up its earnings power as next-generation artist IP grows rapidly and global business expands. It maintained a "buy" (BUY) rating and a target price of 105,000 won. The previous session's closing price was 79,900 won.
Choi Minha, an analyst at Samsung Securities, said, "Led by aespa, which has entered a global tour expansion phase, the solid growth of the next-generation artist lineup that will drive medium- to long-term results—such as Riize, NCT WISH, and Hearts2Hearts—stands out."
Choi said, "The rookie boy group project 'SMTR25,' set for an official debut within the year, built a meaningful fandom even before debut through TV reality entertainment and fan meeting tours," adding, "It is expected to translate directly into a rapid market landing right after debut and an immediate expansion of monetization."
Expansion into the Greater China business is also expected to accelerate. According to Samsung Securities, SM Entertainment established a joint venture (JV), "STE," with Tencent Music Entertainment (TME) in China and plans to oversee everything from planning new Chinese idols to overall management, aiming for a local debut in two to three years. "SMTOWN STORE Shanghai," the first official offline permanent store opened in Shanghai in the second quarter of this year, is expected to become a key base for expanding the local fandom and growing MD performance.
Improved profitability at consolidation subsidiaries is also said to be supporting the strengthening of fundamentals. Dream Maker is improving its margin through expanded project collaboration with headquarters, and SM Entertainment Japan is expected to grow as artists increase active promotions in Japan.
Choi said, "There is a base burden in the second half of this year due to recognition of last year's licensing revenue, but the company-wide structural growth in fundamentals will continue," adding, "Next year, on a consolidation basis, revenue will rise 9.7% on-year to 1.37 trillion won, and operating profit will increase 18.1% to 217.1 billion won."
Choi added, "It is time to focus on the company-wide earnings power that is structurally leveling up rather than short-term earnings volatility."