한국투자증권 has lowered its target price for YG Entertainment from 87,000 won to 62,000 won, a decrease of 28.7%, citing anticipated revenue growth slowdown due to inactivity from existing artists next year. The investment recommendation remains a 'buy.'
Jung Ho-yoon, a researcher at Korea Investment Securities, stated, "While there will be activities from major artists like Blackpink in 2025 and Big Bang in 2026, their absence in 2027 is expected to lead to a decline in revenue growth rates."
YG Entertainment reported a 9.5% decrease in third-quarter revenue year-on-year, totaling 156.7 billion won, with operating profit down 56.9% to 13.5 billion won. This operating profit fell approximately 32% short of market expectations of 19.9 billion won.
The lack of album releases contributed to a 30.3% decline in album and digital music sales, which amounted to 22.3 billion won. However, concert revenues surged by 367% from the previous quarter to 43.9 billion won, reflecting the global tour sales of Baby Monster and Big Bang. Merchandise sales reached a record high of 40.6 billion won, driven by strong sales of Baby Monster tour-related products.
Jung noted, "Baby Monster is expanding its core fanbase and increasing the scale of its tours, with additional performances in Western markets planned for 2027, which is positive. However, the lack of a strong lineup of other artists to support growth is a limitation."
Korea Investment Securities anticipates the debut of a new boy group in the first half of 2027 and a new girl group by the end of the year. If these groups successfully establish themselves in the market, growth visibility could improve starting in 2028.
The target price reduction also reflects a decline in the overall valuation of the entertainment sector. Korea Investment Securities has lowered the applicable price-to-earnings ratio (PER) from 25 times to 20 times.
Jung emphasized, "The performance of the new boy and girl groups debuting in 2027 will be crucial, and it may not be too late to look for buying opportunities as their results become clearer."
* This article has been translated by AI.
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