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

With its new game release schedule targets now postponed to 2023, Webzen’s short-term share price growth momentum is to be blunted in 2H22. Given a temporary absence of new titles, sales will likely slip h-h in 2H22.

New self-developed titles to be rolled out from 2023

– Maintaining a Hold rating, we lower our TP on Webzen from W26,000 to W22,000. With the release schedules for new games (based on Webzen’s own IPs) originally scheduled for this year having now been postponed to next year, we have made downward adjustments to our 2023 earnings projections.

– Although its 2022E P/E (9.2x) is less lofty than the figures for its competitors, the postponing of Webzen’s major new title releases until next year is to dampen its short-term share price momentum and top-line growth.

– Subsidiaries Webzen Blue Rock, Webzen Nova, and Webzen Next are busily developing Webzen’s next wave of self-developed new games, including Project W (item-collecting RPG), Project N (item-collecting RPG), and Project A (strategy). However, with Webzen’s major self-developed new titles not to start being launched until 2023, its release schedule within 2022 is showing only one RPG genre publishing game.

– Released in Taiwan, Hong Kong, and Macau on Jul 26, R2M ranked 16th in Taiwan’s Google Play Store sales rankings as of Aug 9, delivering sound top-line performance.

2Q22 review: OP exceed estimates

– Webzen registered consolidated 2Q22 sales of W69.6bn (-2.8% y-y, -0.4% q-q) and OP of W25.6bn (+10.7% y-y, +15.0% q-q), with OP exceeding both our estimate of W23.3bn and consensus of W22.7bn.

– Released earlier this year in February, Mu Origin 3 contributed to overall sales by steadily maintaining its presence in top-10 Google Play Store sales rankings during 2Q22. Also helping overall margins, Webzen’s marketing costs decreased 52.5% q-q to W2.6bn.

– Looking at 3Q22, we expect Webzen’s OP to decrease slightly q-q to W20.4bn on likely increased labor and marketing cost burdens stemming from the launch of R2M in Asian markets.




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