Mir 4 Scheduled for Global Release in August
The author is an analyst of Shinhan Investment Corp. He can be reached at mj1224@shinhan.com. -- Ed.
2Q21 OP beats consensus at KRW26.9bn (-2.5% QoQ)
Wemade posted operating profit of KRW26.9bn (-2.5% QoQ) on sales of KRW68.9bn (-9.4% QoQ) for 2Q21, exceeding the consensus estimate of KRW21.9bn. Domestic sales from mobile games declined by 24.3% QoQ to KRW41.7bn on a drop in revenue from Mir 4. Daily average sales of Mir 4 in the domestic market is estimated at KRW380mn for 2Q21.
However, license revenue reached post-1Q18 highs of KRW20.2bn, with licensed games continuing to perform better than the company's new game. Other sales came in at KRW2.9bn, with the blockchain related business starting to generate sales.
Focus on release of new game with proven entertainment value
Mir 4, which saw strong response in the domestic market and proved its entertainment value, is scheduled for global release in August. The game supports cross-platform play on PC and mobile devices, and will also be launched on the Steam platform. Blockchain technology adopted on the global version should help to increase user activity in the game world.
Expectations also remain intact for a China release. We believe games based on The Legend of Mir IP will not be affected by the country’s new regulations that limit gaming hours for minors. Seen imminent, the appointment of a local publisher in China should add momentum to Wemade’s share price, considering the popularity of Mir IP games and resumption of game license approvals in the country.
Retain BUY for a target price of KRW72,000
We retain our BUY rating on Wemade for a target price of KRW72,000. Despite a drop in domestic sales from Mir 4, earnings have remained solid on the steady inflow of license revenue. We expect earnings to continue on an uptrend, driven by the global release of Mir 4 in August and the launch of Mir M in 4Q21. Other positives include the appointment of a Chinese publisher within this year and the completion of arbitration proceedings in Singapore (Shanda Games) expected in 1H22.