Webtoon
The author is an analyst for Shinhan Securities. She can be reached at kimaram@shinhan.com -- Ed.
YLAB is a webtoon studio that has published popular titles like Island, Reawakened Man, Terror Man, Get Schooled, Reality Quest, and Study Group on NAVER Webtoon. Some of these stories are set in a shared universe, just like the Marvel Cinematic Universe, allowing readers to enjoy the worldview (characters, backgrounds, stories, etc.) of each work.
The webtoon studio hires its own webtoon writers unlike general content providers. This comes with higher labor costs, but gives the company greater leverage if webtoons make it big, in terms of the rights to intellectual properties and licensing agreements. Moreover, YLAB’s pool of senior best- selling writers is an advantage when it comes to training junior writers and expanding the line-up of works.
Annual cash flows from drama production to exceed KRW1bn
The company has established YLAB Flex for in-house drama production. The subsidiary has ten producers and directors and released the webtoon-based drama series Island, co-produced with Studio Dragon at end-2022, on Tving and Amazon Prime Video.
YLAB’s original IP assets and production capabilities allow the company to hold joint ownership in webtoon-adapted dramas and movies without making a contribution to production costs and generate cash flows. Drama production can create demand for the original IP and webtoon sales from a growing fan base. It serves as a source of revenue that is utilized to produce new webtoons. Profits from drama production are mostly booked at the time of sales. We project drama sales to reach KRW1bn in 2023, KRW2.4bn in 2024, and KRW4.5bn in 2025, based on the registration statement and prospectus.
Market cap estimated at KRW110.8bn-126.7bn; time to pay attention
Content producers are highly volatile with earnings affected by the timing of new releases and their performance in the market. It is also disappointing that they have a relatively smaller presence in overseas markets. However, we focus on: 1) YLAB’s highly popular IP assets and webtoon writers; and 2) forays into new businesses based on strong drama production capabilities. The IPO price band of KRW7,000-8,000 translates to market cap of KRW110.8bn-126.7bn. For 2023, we forecast sales at KRW38.7bn (+29.9% YoY) and operating profit at KRW900mn (positive swing YoY).