Meritz Securities maintained its "Buy" rating on HYBE (352820.KS) while lowering its target price, reflecting the possibility of a short-term slowdown in profitability.
Meritz Securities cut its target price for HYBE to 390,000 won from 450,000 won on Thursday. "First-quarter consolidated operating profit is expected to reach 39.8 billion won ($29 million), falling short of the market consensus of approximately 47.5 billion won," Kim Min-young, an analyst at Meritz Securities, said in a report. "Despite top-line growth, profitability may fall short of expectations."
Revenue for the same period is estimated at 578.4 billion won, up 15.5 percent from a year earlier. Top-line expansion is continuing, reflecting BTS's full-length album, activities by major artists, and sales from concerts and merchandise (MD). However, operating profit margin (OPM) is projected to remain in the mid-6 percent range, as cost burdens increase due to higher artist settlement rates and expanded global promotions.
Recent share price movements are also seen as partly reflecting the earnings pressure. A pattern of gains driven by pre-earnings expectations followed by profit-taking has been repeating, and the possibility of heightened volatility in the short term has also been raised.
However, Meritz Securities forecast that the earnings recovery would gain momentum from the second quarter. "A full-fledged earnings recovery is expected from the second quarter on the back of BTS's world tour," Kim said. "Earnings growth driven by expanded tour and MD sales, along with expectations for the expansion of global and new IP, remain intact."
Intellectual property (IP) momentum is also expected to strengthen, with comebacks from major artists including TXT, TWS, and ILLIT, alongside new group debuts in the second half. The assessment is that a mid- to long-term growth foundation will be maintained as steady growth from existing artists combines with an expanded lineup of new acts.
