Despite Delay in Launch Schedule
The author is an analyst of NH Investment & Securities. He can be reached at jaemin.ahn@nhqv.com. -- Ed.
NCSOFT had postponed the launch target for new title TL to 2023. However, with the main reason behind the delay being the working out of collaborations with overseas partners, expectations of success for the new game accompanied by higher sales volume remain intact.
Launch schedule delay disappointing, but unavoidable step for global success
Although maintaining a Buy rating, we lower our TP on NCSOFT from W550,000 to W500,000. With the launch of Throne and Liberty (TL) being pushed back from end-2022 to within 1H23, we downwardly adjust our related sales estimates. The company has also postponed the releases of Lineage W (global) and Blade & Soul 2 (B&S 2; Taiwan/Japan) to next year.
Despite the delay in launch schedule, high expectations towards TL remain intact. According to recent press releases, the delay comes not in the development stage of the new game, but in the process of discussing publishing in North America and Europe with external partners. And, we point out that TL’s gameability was verified through in-house tests in August. Game-related information is to be unveiled via a big event within the year.
2Q22 review: OP arrives sluggish
On a consolidated basis, NCSOFT posted 2Q22 sales of W629.3bn (+16.8% y-y, -20.4% q-q) and OP of W123.0bn (+9.0% y-y, -49.6% q-q), with OP missing both our estimate of W146.4bn and consensus of W141.9bn. Overall sales and OP declined in line with a drop in Lineage W sales.
Sales of Lineage W totaled W223.6bn (daily average of W2.5bn, -40.1% q-q). Our existing top-line projections for the title already take into account the departure of early users. Although this decline will likely continue this quarter, the pace of it should slow thanks to the well-received Giran update (new region) in August. For 3Q22, we expect Lineage W to show sales of W190.1bn (daily average of W2.1bn, -15.0% q-q).
Turning to Lineage M, sales improved to W141.2bn (daily average of W1.6bn, +5.3% y-y and 21.9% q-q) in 2Q22 in response to 5th Anniversary events for the title. With an update (new character God of Thunder) being slated for this month, strong sales momentum should sustain in 2H22.
Marketing expenses upped to W59.9bn (+43.5% q-q), but should ease in 2H22.