Album and Merchandise Sales in Full Swing
The author is an analyst of NH Investment & Securities. She can be reached at hzl.lee@nhqv.com. -- Ed.
We raise our TP on YG Ent from W55,000 to W62,000. Blackpink’s position as a global force is strengthening thanks to rising awareness of the group in Western markets. The company is securing earnings stability, with album and merchandise sales now in full swing in response to fandom-targeted business activities. We maintain a Buy rating.
Global operator opening eyes to fandom business
Applying a target P/E of 35x (formerly 30x), we raise our TP on YG Entertainment (YG Ent) from W55,000 to W62,000. With awareness of Blackpink growing in Western countries, the group’s global fandom is solidifying, and YG Ent’s fandom-based sales growth of albums, merchandise, and content are in full swing. Our earnings estimates reflect the possibility of the firm’s shares re-rating in response to its strengthening status as a global operator.
We maintain a Buy rating. Over the short term, YG Ent is to enjoy stable earnings growth on fandom-based sales (albums, merchandise). In addition, although the timeline is still uncertain, the possibility of a comeback by Big Bang remains open. Over the mid/long-term, earnings momentum is to be generated by: 1) concert sales expansion led by Big Bang and Blackpink, super lineups that should be capable of global dome tours (including in China) once Covid-19 eases; and 2) improving earnings at the firm’s Japanese subsidiary based on a new group, Treasure.
Strong album sales evidence expansion of fandom
Treasure: Following its debut, the group is chalking up stable album sales (230,000 copies/album), evidencing its solid fandom. Character-based merchandise (developed in conjunction with NAVER) for the group are to be sold as well. Fandom-based album and merchandise sales expansion is to contribute to earnings.
Blackpink: Online concerts via a global platform (YouTube) and regular album sales of 1.25mn copies are proving Blackpink’s solid fandom. All three of the group’s songs released this year have hit the Billboard Hot100 chart, and HYLT recorded 1mn downloads at QQ Music in China. Significant fandom in both Western countries and China is being reconfirmed.
4Q20 preview: All major lineups proving effective
We forecast 4Q20 consolidated sales of W90bn (+37% y-y) and OP of W6.7bn (+567% y-y). Despite strong album and digital music sales centering on Blackpink and Treasure, 4Q20 earnings will likely arrive below consensus as an online concert by Black Pink has been delayed to Jan 2020.