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(Photo= Yonhap news) |
[Alpha Biz= Reporter Kim Sangjin] NH Investment & Securities has raised its target price for SM Entertainment to 105,000 KRW, up from the previous target of 97,000 KRW, reflecting an 8% increase, while maintaining a "Buy" rating. This adjustment is based on the anticipated revenue contribution from new artists starting next year, which is expected to drive an improvement in the company's earnings.
Analyst Lee Hwa-jung from NH Investment & Securities noted that while third-quarter earnings showed a surprise downturn due to higher-than-expected promotional costs for Dear Alice, fourth-quarter results are expected to benefit from new album releases by major artists. Looking ahead to 2025, SM is expected to see further performance gains from new artist groups like RIIZE and NCT WISH, as well as larger-scale concerts from major acts like NCT DREAM and aespa. Additionally, a reduction in losses from subsidiaries, including the U.S. branch and KMR, should contribute to SM’s profitability.
The debut of a new girl group in early 2025 is particularly noteworthy, as it demonstrates the company's effective generational transition of its artist lineup. Based on this, NH Investment & Securities adjusted its target price to reflect 2025 as the point when investment returns from new artists are expected to solidify, applying a target PER of 22 (down from 25).
In SM’s third-quarter financials, consolidated revenue decreased by 9% year-on-year to 242.2 billion KRW, and operating profit dropped by 74% to 13.3 billion KRW.
AlphaBIZ Kim SangJin(letyou@alphabiz.co.kr)
