Pearl Abyss
The author is an analyst for NH Investment & Securities. He can be reached at jaemin.ahn@nhqv.com -- Ed.
It is still too early to expect the release of Crimson Desert. Pearl Abyss’s earnings momentum should pick up step by step from the time related videos start to be released at global game shows and other key events.
Still to lack new game momentum for awhile
We maintain a Hold rating and a TP of W40,000 on Pearl Abyss. To be released in 2024, Crimson Desert is still an anticipated new title. Although development of it should be completed within 2023, it is still too early to gain new game momentum as a fair bit of time is left until the planned launch next year.
Considering also a demanding valuation level (2023E P/E 100.5x), share price momentum is unlikely to revive again until 4Q23 or 2024, when development enters the final stage and specific launch schedule is revealed.
As Black Desert is steadily updating through expansion of new classes and new regions, a sharp drop in sales appears unlikely, but it’s difficult to expect a meaningful rebound.
1Q23 review: Earnings come in sluggish
Pearl Abyss posted 1Q23 sales of W85.8bn (-6.2% y-y, -16.7% q-q) and OP of W1.1bn (-78.9% y-y, -68.3% q-q), with the tepid OP disappointing both our estimate of W6.0bn and consensus of W5.8bn.
Black Desert IP sales dropped to W67.5bn (-4.8% y-y, -5.2% q-q), continuing to decline due to aging IPs.
Marketing costs narrowed to W5.6bn (-31.4% y-y, -55.6% q-q) on an absence of notable marketing activities.