[Korea] Entertainment May 13, 2021 YG Entertainment Buy (122870 KQ ) (Maintain) Increasing content leverage TP: W56,000 Upside: 25.8% Mirae Asset Securities Co., Ltd. Jeong -yeob Park
[email protected] 1Q21 review : Big earnings beat Consolidated revenue of W97bn (+83.9% YoY), OP of W9.5bn (turn to profit YoY) In 1Q21, YG Entertainment proved its enhanced fundamentals by overcoming the absence of offline performances/activities with the release of new content (Rosé and Treasure). Revenue from albums/digital content/goods was up 170.6% YoY, driven by strong sales of albums (980,000 copies; helped by new releases) and goods. Digital content revenue surged 125.6% YoY, boosted by BLACKPINK’s online concert (280,000 paid views and net revenue of around W8bn). Revenue from Google came in strong at W4.5bn (excluding BLACKPINK concert; vs. W2.5bn in 1Q20) on the back of new releases and subscriber growth. Despite constraints on artist activities, management revenue expanded 44.7% YoY, fueled by luxury advertisers’ (Dior, Saint Laurent and Tiffany & Co.) strong preference for YG artists. Elsewhere, the company recorded W15.6bn from TV production (YG Studioplex’s Mr. Queen ) and a valuation gain of roughly W5bn related to Tencent Music Entertainment. Expectations on 2H21 artist Artist activities to gather steam; IP monetization to strengthen on Weverse incl usion activities and Weverse 1) Earnings: During the 2018-20 absence of its main artist group, YG Entertainment built a robust lineup that includes BLACKPINK, Treasure, and iKON. We expect robust ad and appearance income to continue, supported by the growing international profile of the company’s artists.