Meritz Securities reported on August 11 that Studio Dragon is expected to improve profitability through reduced amortization costs related to content and cost savings achieved by utilizing artificial intelligence (AI). The firm maintained a 'buy' rating but lowered its target price from 48,000 won to 43,000 won, reflecting a 10.4% decrease based on revised earnings estimates.
Jung Ji-soo, a researcher at Meritz Securities, stated, "The company is strengthening its restructuring efforts through a strategy to enhance intellectual property (IP) value, including diversification of channels and genres, the establishment of an official YouTube channel, and the creation of a royalty and revenue-sharing structure. We anticipate that the introduction of AI will lead to a 30% efficiency improvement in production costs in the medium to long term."
In the second quarter of this year, Studio Dragon reported consolidated revenue of 145.3 billion won, a 26.9% increase compared to the same period last year, and an operating profit of 15.4 billion won, marking a return to profitability. The operating profit aligned with market consensus of 14.8 billion won. Strong pre-sales for the global OTT release of 'Tomorrow, I Will Go to Work!' and regional sales of 'Secret Audit' contributed to this performance, alongside a reduction in amortization costs and expanded use of AI, resulting in an operating profit margin of 10.6%.
Meritz Securities forecasts that Studio Dragon's consolidated revenue for the year will increase by 7.2% to 569.1 billion won, with operating profit expected to rise by 55.1% to 47.1 billion won. In the second half of the year, a total of 166 episodes are scheduled to air, including anticipated titles such as 'Slowly but Intensely' and '100 Days of Lies.'
Notably, 'Slowly but Intensely' is a major production with an estimated budget of 80 billion won, which is expected to significantly contribute to profits if it performs well with viewers. Additionally, the company aims to enhance long-term profitability through expanded IP commerce and cost efficiencies driven by AI.
* This article has been translated by AI.
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