Upside :Lies in Blackpink World Tour, Fandom Business Expansion
The author is an analyst of NH Investment & Securities. She can be reached at hzl.lee@nhqv.com. -- Ed.
YG Ent. posted a 3Q21 earnings surprise thanks to brisk album sales (Lisa’s solo album) and investment gains from subsidiaries (primarily Maxst). Now is the time to turn attention to the growth potential set to come from the resumption of Blackpink’s world tour, along with the alleviating Covid-19 situation, and further expansion of the fandom business. We maintain a Buy rating.
Upside lies in Blackpink world tour and fandom business expansion
- We maintain a Buy rating and TP of W85,000 on YG Entertainment, favorably noting the firm’s earnings growth potential (from concert resumption and fandom business expansion) and earnings stability (from ad and music distribution businesses).
- 1) Offline concert resumption: Blackpink’s global recognition has increased significantly compared to at the time of its 2019 world tour. As a result, when its world tour resumes, the number of concerts and price per show are expected to rise compared to those of the previous tour. Of note, the last world tour was comprised of 36 shows in 17 countries (7 in North America (arena tour), 4 in Japan (dome tour)). It is only a matter of time before Blackpink’s Japan tour resumes, and anticipation is also building for a resumption of Treasure concerts and a Big Bang comeback.
- 2) Fandom business expansion: MD sales channels have expanded strongly upon the launch of the Weverse platform. We expect to see rising contributions from MD sales upon major artists’ album releases. The possibility of new businesses (eg, NFT businesses leveraging strong artist IPs) also remains open.
3Q21 review: Strong album sales on top of gains from subsidiary investment
- YG Entertainment posted consolidated 3Q21 sales of W86bn (+31% y-y) and OP of W17.3bn (+372% y-y), beating the OP market projection.
- Album sales came to W8.9bn (+8% y-y), generated in large part from Lisa’s solo album (released in September; 700,000 copies sold, W8.5bn in sales). Despite the impact of China’s fan club regulations, which have intensified since early September, the company performed solidly in the quarter. Digital content sales stood at W13.5bn (+17% y-y). Although the new album was released after a six-month hiatus, including the period of July~August, content sales remained sound. Proceeds from the sale of subsidiary Maxst’s stake (W7bn) were reflected as other operating income.
- 4Q21 outlook: Blackpink’s full album release will be delayed until 1H22. As the reopening of concerts is expected, it is highly likely that the album will be released in line with the tour schedule. As Lisa’s solo track (Money) has been rebounding in popularity since mid-October, digital content sales should remain strong, but q-q OP decline looks inevitable amid an absence of new albums.