NCSOFT
The author is an analyst for NH Investment & Securities. He can be reached at jaemin.ahn@nhqv.com -- Ed.
It is currently a key period for NCSOFT to make modifications and improvements to TL in order to address player complaints. Global beta tests scheduled for August/September could be an important inflection point for the company. We are hopeful that the firm will release an improved version of the game within the year.
Global beta test for TL in August/September to be important inflection point
Although sticking to a Buy rating, we lower our TP on NCSOFT from W400,000 to W360,000, reflecting downward revisions to our estimates for the Lineage series due to falling sales rankings on the release of competing MMORPGs.
Global beta tests for Throne and Liberty (TL) are planned for August/September. Focus will be whether the company has addressed complaints raised during the domestic CBT earlier in the year. If the issues have been resolved, the company’s share price should rebound.
2Q23 preview: Sluggish OP
We forecast consolidated 2Q23 sales of W442.7bn (-29.6% y-y, -7.5% q-q) and OP of W30.7bn (-75.1% y-y, -62.4% q-q), with OP likely missing our previous estimate of W49.4bn and consensus of W47.9bn.
Lineage M sales are estimated to have totaled W134.1bn (-5.1% y-y, +3.0% q-q), remaining solid despite the emergence of competitors (such as NightCrow and ArcheAge War).
However, sales decline for other games looks inevitable. In particular, we believe that Lineage W sales fell rapidly to W107.9bn (-51.8% y-y, -12.0% q-q) and Lineage 2M sales dropped to W69.4bn (-27.9% y-y. -5.0% q-q).
After falling significantly in 1Q23, marketing costs likely rose q-q to W29.8bn (-50.2% y-y, +514.1% q-q); however, they should remain lower y-y.