NH Investment & Securities has lowered its target price for HYBE from 300,000 won to 270,000 won, citing deteriorating investor sentiment due to increased market volatility. The firm maintained its 'buy' rating.
Lee Hwa-jung, a researcher at NH Investment & Securities, stated, "Despite the earnings surprise, concerns over profitability due to the increased share of concert revenue have led to an excessive drop in stock prices. This overlooks the record-high growth in overall revenue." She explained that the decline in profitability is simply a result of changes in the revenue mix.
Lee noted, "The expected price-to-earnings ratio (PER) for this year is around 19 times, which is historically undervalued. The rapid growth of the fandom for NewJeans and the expansion of global music sales centered around BTS and Cat's Eye will be long-term growth drivers." She added that the current situation is favorable for bottom-fishing investments.
HYBE's consolidated revenue for the second quarter of this year reached 1.4 trillion won, a 106% increase compared to the same period last year, while operating profit surged 159% to 170.9 billion won.
Lee attributed the strong performance to the success of BTS concerts, the expansion of merchandise sales, and the growth in music streaming, stating, "The overall increase in both unit prices and demand across revenue sources has further strengthened the long-term growth potential."
The concert segment recorded its highest revenue ever at 647.7 billion won, driven by rising ticket prices and sales volume. Concerts accounted for 45% of total revenue, significantly exceeding the previous estimate of 38%.
While the increased share of concert revenue, which has a higher cost ratio than other revenue sources like music and merchandise, has put some pressure on overall profitability, Lee emphasized that the economies of scale from overwhelming revenue growth have offset this, maintaining a solid contribution to absolute profits.
* This article has been translated by AI.
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