Nasmedia
The author is an analyst for NH Investment & Securities. She can be reached at hzl.lee@nhqv.com -- Ed.
Nasmedia registered an earnings shock for 1Q23 on heavier-than-expected damage to core business earnings amid an economic slowdown. Reflecting such, we lower our TP to W30,000, but stick to a Buy rating in consideration of both the firm’s differentiated AI capabilities and its global partnerships.
Even if it takes a bit longer, time will heal all wounds
We lower our TP on Nasmedia by 14% to W30,000 (from W35,000), reflecting downward adjustments to our earnings estimates stemming from harder-than-expected hit to earnings at the firm’s core business (digital advertising) amid reduced advertiser spending. Despite unfavorable business conditions, a relatively high sales growth rate should sustain at the firm’s new mobile platform business. But, with this growth to be accompanied by heftier structural costs, time is needed for overall recoveries in terms of both top line and profitability.
Note differentiated AI capabilities and global partnerships
We maintain a Buy rating on Nasmedia. The overall advertising industry conditions having deteriorated as of late, but we view the firm's share price as already baking in related concerns. Thus, we believe that now is the time to focus on the firm’s differentiated mid/long-term growth drivers (rather than currently slow earnings). In detail, the mobile platform arm continues to grow rapidly by strengthening its AI capabilities via cooperation with KT, and mid/long-term growth potential has been secured thanks to partnerships with global platforms, including Netflix (exclusive) and Amazon.
1Q23 review: Economic slowdown effects unavoidable
Nasmedia registered an earnings shock for 1Q23, posting consolidated sales of W157.5bn (+119% y-y) and OP of W36.5bn (+458% y-y). Core business sales fell to W20.2bn (-16% y-y) on reduced marketing expenditure by major advertisers (amid a general economic slowdown) and decreased IPTV sales following OTT becoming the norm. Equipped with AI capabilities, the firm’s new mobile platform business is performing better than traditional advertising vehicles, but overall profitability is being sapped by an accompanying rise in operating costs.