High Growth Potential Thanks to Full-fledged Fandom Sales
The author is an analyst of NH Investment & Securities. She can be reached at hzl.lee@nhqv.com. -- Ed.
YG Ent booked a 1Q21 earnings surprise, as margins from Blackpink’s online concert, which signaled the start of YG’s fandom business, surpassed expectations. The fandom business is likely to show high growth going forward thanks to cooperation with HYBE. We maintain a Buy rating on YG Ent.
High growth potential thanks to full-fledged fandom sales
We maintain a Buy rating and a TP of W62,000 on YG Entertainment (YG Ent).
Businesses (albums, MD, online concerts, etc) targeting global fandoms for YG Ent’s major artists (Blackpink, Big Bang, Treasure) have begun in earnest. Blackpink’s first online concert, which signaled the start of YG Ent’s fandom business, significantly contributed to 1Q21 earnings by selling 280,000 tickets. The fandom business is likely to display full-fledged growth going forward thanks to collaboration with HYBE. We advise paying attention to YG Ent’s high earnings growth through full-scale fandom sales.
In the mid/long term, we expect additional momentum from the resumption of: 1) Blackpink’s world tour under improved conditions (price↑, number of concerts↑) upon Covid-19 easing; and 2) Big Bang and Blackpink dome/stadium tours in China once Korea-China relations improve. Considering the group’s rising pace of recognition in Japan, momentum related to Treasure’s Japan Tour is also valid.
1Q21 review: Earnings surprise led by fandom sales
YG Ent recorded a 1Q21 earnings surprise, with consolidated sales of W97.0bn (+84% y-y) and OP of W9.5bn (TTP y-y). Profitability related to Blackpink’s fandom sales (online concerts and MD) exceeded expectations and Treasure’s fandom sales (albums and MD) are growing smoothly.
In the case of Blackpink’s online YouTube concert, ticket sales (excluding YouTube fees) reached W8.0bn~9.0bn, with a GPM of around 30%. In addition, other concert-related sales (MD and VOD) significantly contributed to OP. We note that online concerts at YG Ent’s competitor are far less profitable as the firm does not have its own platform. Also, YG Ent’s margins are bolstered by its rich global fandoms.
A q-q drop in OP appears inevitable due to a lack of plans for major artists. But, fandom sales should begin to emerge in earnest through collaboration with Weverse and the resumption of major artist activities (Blackpink(including the release of Lisa’s solo album), Big Bang, and Treasure).