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The author is an analyst of NH Investment & Securities. She can be reached at hzl.lee@nhqv.com. — Ed.

In early January, YG Ent released both a teaser for the launch of a new girl group and plans for G-Dragon’s solo activities. We anticipate that the firm’s biggest weakness (ie, excessive dependence on Blackpink) will soon be resolved. In addition, Blackpink’s contract renewal should go smoothly. We adhere to a Buy rating and TP of W77,000.

Reinforcements finally arriving

We maintain a Buy rating and TP of W77,000 on YG Entertainment (YG Ent).

Since the resolution of an issue related to general manager Hyunsuk Yang at end-December, YG Ent has been strengthening its business overall. Regarding the decision not to renew contracts with some artists, it is believed that the firm is choosing to concentrate its efforts on a core group of main artists. In early January, the company released a teaser for the launch of a new girl group (Baby Monster), alongside the announcement by G-Dragon himself that he will resume solo activities this year. In the case of Baby Monster, members’ performance teaser videos are being released every week to a favorable public response. Concerns over excessive reliance on a single artist (Blackpink) are to be resolved through the addition of a promising new group and G-Dragon.

Blackpink contract renewal only a matter of time

Despite a variety of momentum sources, YG Ent shares remain undervalued to those of peers (HYBE, JYP Ent, SM Ent). As Blackpink’s August contract expiration approaches, related concerns are being reflected. However, we see little need for a negative reaction to this upcoming event, as considering the practical benefits to both the artists and the firm, contract renewal will likely go smoothly. Now is the time to let go of excessive concerns.

4Q22 preview: Beginning of Blackpink world tour effects

We forecast consolidated 4Q22 sales of W145.5bn (+64% y-y) and OP of W23bn (+74% y-y), with both figures to meet consensus.

Ticket and MD revenue related to Blackpink’s world tour (24 shows in the West and 2 shows in Korea) should prove sound. In addition, revenue is to be reflected in relation to Treasure’s Japan tour. In 4Q22, while the only new album release was from Treasure (570,000 copies), deferred sales related to Blackpink’s September album launch were likely recorded. Digital track revenue should also come in sound, as Blackpink’s new album continues to be a hit, and 2H22 revenue for China should be recognized in 4Q22.



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