1Q22 Review: OP Tops Expectations
The author is an analyst of NH Investment & Securities. He can be reached at jaemin.ahn@nhqv.com. -- Ed.
Expectations for Krafton’s Callisto Protocol are to gradually pick up steam in the days ahead. Given the firm’s current valuations, we believe that it is now time to seek a rebound rather than fear for additional share price decline.
Expectations for next lineup to rise
- We maintain a Buy rating and TP of W400,000 on Krafton. Callisto Protocol, which is anticipated to achieve great success in the global market, is likely to be released within this year, and related momentum should gradually begin to emerge. With its 2022E P/E having fallen to 17.0x due to share price decline, we believe that it is now time to seek a rebound rather than fear for additional share price decrease. But, as some time remains until the game’s launch, sales over 2Q22~3Q22 may prove sluggish compared to the 1Q22 figure due to off-season effects.
1Q22 review: OP tops expectations
- Krafton booked consolidated 1Q22 sales of W523.0bn (+13.5% y-y, +17.8% q-q) and OP of W311.9bn (+37.3% y-y, +625.5% q-q), with OP exceeding both our estimate of W182.8bn and the consensus of W192.1bn. Sales growth outstripped expectations thanks to peak seasonality for the Chinese game market and a recovery of sales for PUBG Mobile. In 1Q22, cost-saving factors were also reflected, including the write-back of stock compensation costs and a reduction in payment fees.
- In 1Q22, mobile sales totaled W395.9bn (+4.5% y-y, +30.4% q-q). Bolstered by the entering of peak seasonality for the Chinese game market, sales of Game for Peace climbed and PUBG Mobile enjoyed a traffic recovery. Meanwhile, sales of PUBG: New State remained relatively similar q-q. While traffic is estimated to be recovering gradually, sales increase still needs to be verified.
- Operating costs stabilized at W211.1bn (-9.7% y-y, -47.4% q-q), helping to drive OP growth. With regard to stock compensation costs, W53.2bn was recovered due share price decline since the beginning of the year. Related costs may increase again if Krafton’s share price rises after 2Q22. Payment fees amounted to W55.9bn (down by 52.6% or W118.1bn q-q) amid an absence of e-sports competitions.