Global Export of K-pop Artist Training System
The author is an analyst of NH Investment & Securities. She can be reached at hzl.lee@nhqv.com. -- Ed.
In Japan, newcomer NiziU recorded album sales 1.2x higher than those recorded by TWICE. Taking into account the export capabilities of JYP’s K-pop artist training system, we increase our 2021 earnings estimates, raise our TP to W46,000, and upgrade our rating to Buy.
Global export of K-pop artist training system
We raise our TP on JYP Ent to W46,000 as we: 1) increase our earnings estimates to reflect NiziU's strong growth trend; and 2) revise up our target P/E to 35x (previously 30x) considering the export capability of the firm’s artist training system.
We also upgrade our rating to Buy. The export capability of JYP’s artist training system, which has been confirmed by the success of NiziU, is expected to provide mid/long-term momentum. Through the K-pop artist training system, trainees are selected in overseas markets and trained through the company’s specialized program, and they then release localized content. The firm’s local projects are expected to see continued success. We note that a Chinese boy group is slated to debut in 2H21.
NiziU's expectation-beating growth to greatly contribute to 2021 earnings
In 2018, when TWICE made its full-fledged debut in Japan, it released two singles (JYP1,300 per copy) and one regular album (JYP3,240). The group sold 260,000 singles and 180,000 albums (first week sales basis), and an arena tour was held in 2H18. The solid figures greatly contributed to JYP’s OP growth (+W10bn y-y) in 2018.
Based on Google Trends, interest in NiziU is similar to that of TWICE when they first entered Japan. NiziU’s first single (JYP1,600 per copy) sold 310,000 copies in the first week of release, which is 1.2x higher than TWICE’s first single sales. Even if we assume that a concert tour for NiziU is impossible in 2021, if they succeed in matching Twice’s releases in 2018 (two singles and one album), additional OP of W10bn is expected.
4Q20 preview: Earnings to be buoyed by album sales for domestic lineups and NiziU’s merchandise sales
JYP’s consolidated 4Q20 results should meet consensus, with sales of W43.8bn (-5% y-y) and OP of W13.1bn (-7% y-y). Despite an absence of concerts due Covid-19, album sales for major artists will be reflected. We note that sales from NiziU (excluding merchandise sales) will be booked from 1H21.