Brisk Fandom Business
The author is an analyst of NH Investment & Securities. She can be reached at hzl.lee@nhqv.com. -- Ed.
YG Ent registered an earnings surprise for 2Q21. Its sales growth stamina is strengthening on both the expansion of the fandom and the start of HYBE album and music sales. We raise our TP to W85,000 in consideration of both promising growth potential following the start of full-fledged fandom business and the firm’s ongoing stable album and music sales. We continue to suggest YG Ent as our sector top pick.
Offers abundant upside potential and stronger earnings stamina
We raise our TP on YG Entertainment (YG Ent) from W71,000 to W85,000, reflecting: 1) a change in our base year to 2022; and 2) boosted earnings estimates in light of brisk fandom business following the Weverse collaboration and the full-fledged effects of HYBE album and music sales at a subsidiary.
We maintain a Buy rating, continuing to offer on YG Ent as our sector top pick. The firm offers an attractive combination of stable earnings and promising growth potential thanks to: 1) the resumption of offline concerts; and 2) high upside potential related to fandom business expansion. Moreover, its quarterly earnings strength is being improved by a subsidiary’s HYBE album and music distribution contract. Lineup expansion through the debut of a new girl group represents another positive.
Blackpink’s makes entry into Weverse Shop: Fandom business sales to begin in earnest
Blackpink secured 1.7mn subscribers in 10 days from its entry into Weverse on Aug 2, and merchandise sales began on the platform on Aug 6. Related sales are expected to be maximized in line with two comebacks (Blackpink and a solo album for Lisa, a member of Blackpink) in 2H21. Based on online concert ticket sales at the beginning of the year, assuming an average monthly paying users of 250,000 and ARPPU of W70,000 in 2022, we expect the firm’s quarterly commission revenue from Blackpink-related sales on Weverse to reach around W8bn. A significant contribution to OP is expected even if artist royalties are taken into account.
2Q21 review: Registers earnings surprise, even without activities
YG Ent recorded an earnings surprise in 2Q21, delivering consolidated sales of W83.7bn (+56% y-y) and OP of W10.5bn (+277% y-y).
Headquarters: Digital sales for older albums were brisk despite the absence of any special gigs and performance. As a result of the increase in the size of fandom for the main lineup, sales stamina looks to be strengthened. The Lisa solo album release is scheduled for 3Q21
Subsidiary: Contributing to the overall earnings surprise were YG PLUS’s HYBE album/music distribution effects. In 3Q21, earnings growth is to be spurred by both the launch of a new BTS album and the release of Blackpink’s 5th anniversary merchandise at Weverse Shop.