KB Securities Lowers YG Stock Goal With Estimation Of Decrease In YG’s Performance

On March 27th, KB Securities lowered their target stock price for YG Entertainment from 95,000 won to 60,000 won, saying YG’s performance is expected to decline due to the agency’s failure to renew individual contracts with BLACKPINK members.

Researcher Lee Sun-hwa pointed out, “As YG failed to renew individual contracts with BLACKPINK members, and the two planned BLACKPINK’s solo activities have been excluded from YG’s performance estimation so it is inevitable that the agency’s revenue will decline this year”.

She explained, “Last year’s exclusive contract down payment, including the renewal of BLACKPINK’s group contract, BABYMONSburden from amortization of intangible asset has also increased”, adding, “As a result, the year-on-year operating profit ratio will reduce by 5.5% points”.

Therefore, the company expected the operating profits this year and next year to be 47 billion won and 82 billion won, respectively, and lowered their estimates by 56% and 32%, respectively.

This year’s operating profit estimate is 40% lower than last year’s annual operating profit of 79 billion won.

The researcher said, “Recently, the competition of 5th generation idols has intensified as the gap between new artists’ debuts has shortened a lot”, adding “Another concern is that the return on invested capital (ROIC) of rookies has declined as the activity cycle has been shortened, making it difficult to realize economies of scale”.

However, the researcher maintained their investment opinion as “buy”, saying “The number of world tours and fanmeetings is expected to increase along with TREASURE’s new album release this year and BABYMONSTER’s mini album release next month. This will reduce the risk of YG relying solely on BLACKPINK”.

On March 26th, YG Entertainment closed at 46,200 won, recording an increase of 1.32% from the previous session.