D&C Media: Despite Sluggish Growth at Main Business, Expectations Remain for IP Utilization 

The author is an analyst of NH Investment & Securities. He can be reached at jack.baek@nhqv.com. — Ed.

With competition intensifying among domestic content providers, D&C Media’s domestic sales forecasts will need to be lowered accordingly. Positives still exist, however, including: 1) the increasing utilization value of the firm’s core IPs; 2) growth of the global market (including North America); and 3) OPM expansion secured via the internalization of webtoon studios.

Entering low-growth phase

Compared to our expectations in times of rapid market expansion (eg, 2017~2020), we have tempered our projections for the domestic sales growth of D&C Media’s webtoon and web novel business, noting that platforms’ GMV growth has turned sluggish alongside an intensification in competition among content providers.

However, healthy sales increase in overseas webtoon markets secured via an expansion of Piccoma (Japan) and Tapas Media (North America) should offset domestic sales decline. In particular, if brisk growth continues in the North American market, driven by KakaoPage, the company should benefit as a major content provider. In addition, Piccoma’s planned entry into France this year (official launch in May) promises to bring greater distribution of D&C Media’s content offerings.

Expanding utilization of the firm’s core IPs such as Solo Leveling is to continue serving as a growth point. We note that detailed game development information for a Solo Leveling-based title was revealed by Netmarble earlier this year, and the game is expected to be released around end-2022 at the earliest. Currently internalizing webtoon studios, D&C Media is to launch a range of works targeting male audiences from 1Q23.

Lower TP by 20% from W50,000 to W40,000

D&C Media is forecast to report sluggish 1Q22 sales of W16bn (-3.8% y-y) and OP of W3.5bn (-13.9% y-y). Chopping our previous estimates by over 20%, we expect the firm to post 2022 sales of W69.2bn (+2.7% y-y) and OP of W14.5bn (-4.5% y-y).

Although lowering our TP by 20% to W40,000 (adhering to target P/E of 41x), we maintain a Buy rating in light of expectations for the securing of guarantee for the use of Solo Leveling IP following the launch of the above-mentioned game in 2023 and further IP utilization.


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