Time to Wait for New Title Launches in 2H21
The author is an analyst of NH Investment & Securities. He can be reached at jaemin.ahn@nhqv.com. -- Ed.
MU Miracle 2, released by Tencent in China on Apr 9, failed to maintain its solid initial performance, showing a sales downtrend and weakening momentum. In 2H21, alongside the anticipated launch of additional MU IP-based titles, expectations should be rising towards the release of Archangel of Glory and MU Miracle 2 in the Korean market.
Time to wait for new title launches in 2H21
- Although we maintain a Buy rating on Webzen, we lower our TP from W60,000 to W43,000. MU Miracle 2, launched by Tencent in China on Apr 9, failed to maintain its initial sales ranking, showing a decline in sales and dwindling momentum. Given such results, we downwardly adjust our earnings estimates from 2021 forward.
- MU Miracle 2 recorded a solid initial performance, staying within the top 10 in terms of Apple App Store sales ranking shortly after launch. As of May 6, however, it had dropped to 30th place in less than one month from launch. In contrast to our initial expectations, the title failed to sustain a strong sales ranking. Accordingly, we have lowered our sales estimates.
- In addition to Korean versions of Archangel of Glory (slated for release in 2H21) and MU Miracle 2 (2022), we expect to see the rollout of additional new works based on MU IP in the future. While a hiatus of momentum looks likely for the company, as its share price has already adjusted, with its 2021E P/E having fallen to 11.1x, further share price decline should be limited.
1Q21 review: Earnings meet expectations
- Webzen recorded 1Q21 sales of W78bn (+127.1% y-y, -15.7% q-q) and OP of W37.3bn (+290.6% y-y, -3.7% q-q), with OP slightly missing our previous estimate of W39.7bn but beating the market projection of W34.6bn. Backed by the reflection of sales of Archangel of Glory, launched in China in Jan 2021, overseas MU IP-related sales increased 53.1% q-q to W19.5bn.
- Although MU Miracle 2 underperformed expectations, its sales ranking remains in the 30s, with Archangel of Glory hanging around in the 40s. Considering such figures, we estimate Webzen’s 2Q21 OP at W37.9bn (+130.5% y-y), a level similar to the 1Q21 result.