The author is an analyst for NH Investment & Securities. She can be reached at hzl.lee@nhqv.com -- Ed.
Excluding losses at YG Investment, YG Ent’s 4Q23 results met our expectations. BabyMonster’s first debut album, which is to feature the return of main member Ahyeon, is to be released on Apr 1. We expect the album launch to reignite investment momentum, which has been absent for some time. We adhere to a Buy rating.
Awaiting BabyMonster’s debut album
We lower our TP on YG Ent from W70,000 to W65,000. Taking a more conservative view, we push back our assumption for the release date of Blackpink’s next album from 2024 to 2025, and trim our estimate for Blackpink’s 2024 annual album sales (including solo releases) to 40% of the previous level. However, our album sales forecasts for BabyMonster, whose main member (Ahyeon) has returned, and Treasure, which boasts a solid Japanese fanbase, remain intact. Both artist groups are predicted to make comebacks this year.
We maintain a Buy rating. With the company’s current share price appearing not to reflect any expectations, the only upside left is success for BabyMonster and Treasure’s new albums to be released in 1H24 and confirmation of a resumption of Blackpink group activities in 2H24. In addition, investment sentiment for the overall industry, which has been somewhat sluggish due to off-seasonality at the start of the year (absence of major artist activities), is expected to recover on the comebacks of various artists in March and April. We advise taking a long-term view.
4Q23 review: Meets expectations if excluding YG Investment losses
YG Ent posted consolidated 4Q23 sales of W109.4bn (-12% y-y) and OP of W0.4bn (-98% y-y), missing consensus but meeting our estimates when excluding losses at sub-subsidiary YG Investment (losses of W6bn~7bn). Considering the uncertain financial environment, YG Investment was likely conservative toward evaluation losses on assets held.
Due to the overall absence of artist activities, earnings were quite sluggish in 4Q23 compared to the previous four quarters. However, YG Ent was able to prove its essential quarterly earnings strength in 4Q23. In particular, we draw attention to: 1) its strong digital content sales thanks to the success of BabyMonster’s new track and its abundant older library; and 2) its ad sales growth driven by the renewal of artist ad contracts.