BTS World Tour Scheduled for 2022
The author is an analyst of KB Securities. She can be reached at leesunhwa@kbfg.com. -- Ed.
Cut target price 14.0% from KRW500,000 to KRW430,000
We maintain BUY on HYBE but lower our TP by 14% from KRW500,000 to KRW430,000 to reflect an increase in COE (8.40%→9.19%) in line with an increase in risk-free rate (1.31%→1.41%).
4Q21 review: OP of KRW73.9bn (+36.8% YoY) in line with consensus
HYBE reported 4Q21 consolidated revenue of KRW459.8bn (+48.0% YoY, +34.8% QoQ) and another record OP of KRW73.9bn (+36.8% YoY, +12.5% QoQ; 16.1% OPM), which is in line with the market consensus of KRW72.1bn.
OP growth trails revenue growth
In 4Q21, Artist Direct-involvement revenue came in at KRW165.7bn (36% of total revenue) and Artist Indirect-involvement revenue reached KRW294.1bn (64%). Merchandise/licensing revenue exceeded expectations on deferred 3Q21 sales. Artist Indirect-involvement revenue climbed sharply (+86.5% YoY, +65.6% QoQ), with BTS online concerts pushing up Contents revenue. OP growth trailed revenue growth because of an increase in labor costs (i.e., incentive payments) and higher logistics costs amid rising ocean shipping rates.
BTS world tour scheduled for 2022
For 2022, BTS’ world tour is expected to be a major earnings driver. Starting with its Permission to Dance on Stage concert in Seoul on Mar 10, the boy band has scheduled its tour with the release of a new album. Also, given that BTS is to attend the Grammys in April, it may also be planning a U.S. tour. In 2019, BTS had 1.38mn attendees at 35 concerts, leading to offline concert revenue of KRW191.1bn. Also, TXT and ENHYPEN plan to hold offline concerts this year, marking firsts since their debuts.
Game business to strengthen in 2023
To stave off an expected revenue decline when BTS members join the Korean military in 2023, HYBE plans to strengthen its game business. The company has set up its Interactive Media unit, which consists of ~80 top-tier producers in the gaming industry, and plans to launch a new casual, mobile character management game in June 2022. We note that major casual game companies (e.g., Devsisters, Com2uS, Netmarble) recorded avg. revenue/OP of KRW90.5bn/KRW19.3bn in their first year of game launches.