SM, expectations for next year are still valid despite disappointing second half performance

Although the performance in the second half of the year is disappointing, expectations for next year are still valid. The investment recommendation is ‘buy’, and the target stock price is maintained at 165,000 won.

Researcher Lee Ki-hoon of Hana Securities mentioned, “Recently, Kakao-related risks have been highlighted, and the situation is highly uncertain due to legal issues. In addition, in the industry, risks related to personnel, such as BLACKPINK’s re-contracting and drug-related issues, are heavily reflected, causing overall weakness in the stock prices of entertainment agencies.”

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Due to these risks, the expected price-earnings ratio (PER) for 2024 has dropped to around 17 times. Researcher Lee evaluated this as approaching the levels seen during difficult market conditions during TVXQ’s enlistment or in 2022.

As the stock price has approached the low point, researcher Lee pointed out that it is a price range where aggressive increase in weight can be considered.

In the third quarter, sales and operating profit reached 266.3 billion won and 50.5 billion won, respectively, meeting the consensus and achieving the highest performance ever.

SM Entertainment

Researcher Lee stated, “The performance trend in the second half of the year may feel somewhat disappointing compared to previous expectations, but expectations for 2024 are still valid. The expected separate basis operating profit is 166.5 billion won, with expectations for annual album sales of 25 million units and various secondary rights growth through synergy with Weverse.”

With comebacks planned for groups such as aespa, NCT Dream and Riize from the first quarter of next year, along with the official debut of NCT New Team, it is expected that management revenue will grow steadily from the first half of the year.

Source: Edaily

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