Earnings to Slowly Recover on New Game Momentum
The author is an analyst of NH Investment & Securities. He can be reached at jaemin.ahn@nhqv.com. -- Ed.
Despite the top-line contribution of SpinX Games (acquired in 2021), Netmarble posted a significant 1Q22 operating loss due to the aging of its existing lineup. However, starting with the launch of new games from June, earnings momentum and sales growth should reappear.
Earnings to slowly recover on new game momentum
- We maintain a Buy rating on Netmarble but lower our TP from W132,000 to W95,000. Since 2H21, there has been no sales contribution from new games due to large delays in release schedules. At the same time, existing titles are showing earnings decline due to aging. Of note, despite the company’s strategy of boosting sales through proliferation, the number of new game releases has decreased sharply since 2H21.
- Nevertheless, with new games set to be released from June, both earnings momentum and sales should rise moving ahead compared to the 1Q22 levels. Following the launches of Merge Kuya Island on Jun 15 and Disney Mirrorverse on Jun 23, Seven Knights Revolution (a highly anticipated title of 2H22) is to be released on Jul 28. Netmarble is also preparing to roll out Overprime, Grand Cross W, and HypeSquad, in addition to a range of P2E titles such as Golden Bros, Champions: Ascension, and Everybody’s Marvel: Meta World.
- Merge Kuya Island (released Jun 15) is showing a good start, rising to 20th in Apple’s App Store sales rankings (as of Jun 19). As a title in the merge genre, which has enjoyed rising popularity as of late among casual gamers, Merge Kuya Island is expected to continue bringing in light users based on Kuya IP.
OP recovery to start in 3Q22
- Netmarble, which logged a sizeable 1Q22 operating loss, is forecast to post a bottom-line recovery from 2H22, when the launch of new lineups should kick off in earnest. However, an operating loss looks inevitable for 2Q22. We expect the firm to report 2Q22 sales of W661.6bn (+14.6% y-y, +4.8% q-q) and an operating loss of W2.2bn (TTL y-y).