New BTS Album Scheduled for Jun 10
The author is an analyst of KB Securities. She can be reached at leesunhwa@kbfg.com. -- Ed.
Maintain BUY, target price of KRW430,000
We maintain BUY and TP of KRW430,000. 1Q22 revenue should miss the consensus on slowing new merch sales for BTS PTD concerts and major artists’ inactivity. However, 2Q22 earnings should improve QoQ, as a new BTS album is scheduled for Jun 10. The stock is trading at 37.9x 12m fwd P/E (vs. post-IPO avg. 44.5x), weighed down by BTS’ military issue and investor aversion to growth stocks amid rising interest rates. In our view, the recent correction is excessive, presenting a buying opportunity given the upcoming album, the resumption of BTS’ world tour in 2Q22 and HYBE’s expansion into games/NFTs.
1Q22 preview: OP of KRW36.5bn (+60.3% YoY) to miss market consensus
We forecast 1Q22E consolidated revenue/OP at KRW321.5bn (+80.3% YoY, -29.8% QoQ)/KRW36.5bn (+60.3% YoY, -50.5% QoQ; 11.4% OPM), with OP missing the consensus by 22.8%, or KRW47.3bn. Most major artists (incl. BTS, Seventeen, TXT) did not release albums in 1Q22, yet Enhypen managed to boost domestic album sales by 35.5% YoY to 2.45mn copies. Also, BTS PTD concerts in Seoul were held for only three days, while concerts in L.A./Las Vegas were held for four; Seoul merch sales in the second week of March will be reflected in 2Q22 earnings on completion of delivery.
Sufficient momentum in 2Q22: New BTS album, Weverse 2.0, new game, Le Sserafim debut
Despite our disappointing 1Q22 earnings outlook, we see sufficient momentum in 2Q22. BTS’ Las Vegas concerts had 50,000 attendees/day and were streamed live. In addition to the new album, HYBE is preparing to launch Weverse 2.0 (integrates Naver’s V Live services) in 1H22 and introduce a character-managing casual mobile game in June. Also, new girl group Le Sserafim, produced by Source Music, will debut on May 2. With BTS military issue unresolved, we view the correction excessive, Also, expansion of artist pipeline and revenue growth from indirect artist contributions have not been priced in.