NCSOFT
The author is an analyst for NH Investment & Securities. He can be reached at jaemin.ahn@nhqv.com -- Ed.
NCSOFT is striving to overcome unfavorable game feedback from players and investors by achieving success with new games. CBT for TL in Korea is expected to be an inflection point. After the CBT, expectations should further pick up on the approach of launch date disclosure.
TL release approaching
We maintain a Buy rating and TP of W530,000 on NCSOFT. Expectations for TL remain valid, and the recent success of Nightcrow, ArcheAge War, and Wars of Prasia confirms that the Korean MMORPG market still holds potential. In addition, Lost Ark, which showed a strong performance last year in the North American market, is also poised for success on the global stage.
Throne and Liberty (TL) is on track for beta test ‘Laslan Vanguard’ in Korea at end-May. After the CBT, the game will enter final preparations for launch.
1Q23 review: OP beats reduced expectations
NCSOFT registered consolidated 1Q23 sales of W478.8bn (-39.4% y-y, -12.6% q-q) and OP of W81.6bn (-66.6% y-y, +72.1% q-q), with OP exceeding both our estimate (W41.2bn) and consensus (W47.2bn). Of note, although OP declined both y-y and q-q, it easily beat the recently lowered consensus. Although Lineage W sales were sluggish, overall marketing costs narrowed thanks to reduced Lineage M promotion.
Lineage M sales totaled W130.1bn (daily average sales of W1.45bn; +12.3% y-y, +15.4% q-q), remaining stable even after six years from the game’s launch. Meanwhile, sales of Lineage W came to W122.6bn (daily average sales of W1.36bn; -67.2% y-y, -30.7% q-q), showing a decline.
Marketing expenses fell to W4.9bn (-88.4% y-y, -89.9% q-q) amid a lack of game events in 1Q23, helping to bring OP growth.