[Korea] Entertainment May 17, 2021 JYP Entertainment Buy (035900 KQ ) (Maintain) Solid earnings despite absence of concerts TP: W47,000 Upside: 30.9% Mirae Asset Securities Co., Ltd. Jeong -yeob Park
[email protected] 1Q21 review : Better than Consolidated revenue of W32.3bn ( -4.9% YoY), OP of W13.8bn (+2.5% YoY) expected Although 1Q21 revenue contracted on a void in artist activities, OP margin hit a record high of 42.6%, bolstered by the impact of strong digital content revenue. Gross margin improved 5.6%p YoY to 65.1%, thanks to overseas content-driven growth (higher mix of non-management revenue). 1) Album/digital music (+44.1% YoY): Overseas digital music revenue soared 141% YoY, boosted by a new contract with a Chinese company. Album revenue grew 25% YoY. 2) Management (-28.5% YoY): Performance/appearance revenue declined, though advertising revenue modestly recovered (+17% QoQ). 3) Merchandise/other (-26.0% YoY): Merchandise revenue slumped 67% YoY, but YouTube revenue continued to grow (+112% YoY to W3.4bn). Despite an uptick in SG&A expenses (+7.5% YoY), the shift in the income structure from management to content improved underlying profitability. Robust earnings expected in New artist projects and artist activities to gather steam 2021 Following a lull in 1Q21, JYP’s artist lineup will become active again from 2Q21, with 2PM (full group) and TWICE (individual ads and comebacks every two months) resuming activities, ITZY releasing a new album every quarter, and Stray Kids continuing activities. Given the growing fan bases of the next-generation artist lineup (Stray Kids and ITZY) , expectations on album sales are increasing every year.