Regional Company Focus Studio Dragon Bloomberg: 253450 KS, Reuters: 253450.KS Refer to important disclosures at the end of this report DBS Group Research . Equity 9 Nov 2018 BUY, KRW104,000 KOSDAQ: 693.7 High multiples justified (Closing price as of 08/11/18) Price Target 12-mth: KRW120,000 • 3Q18 OP in line with scaled down OP consensus • Airing and production of potential big hits ahead Reason for Report: 3Q18 earnings review Potential catalyst: Growing demand for Korean drama series • Sales to China may resume if ban on Korean content is Where we differ: We are more optimistic than the market lifted • Retain BUY, KRW120,000 TP Analyst Regional Research Team
[email protected] Triple-digit profit growth on solid drama sales. Studio Dragon posted 3Q18 revenue of KRW123.7bn (+60% y-o-y, +67% q-o-q) and OP of KRW21.6bn (+225% y-o-y, +195% q-o-q), in line with Price Relative the most recent consensus estimate (KRW22.9bn after Oct). 140,000 180 Broadcast revenue was KRW48.9bn (+17% y-o-y, +44% q-o-q) 120,000 160 100,000 140 and copyright sales revenue was KRW63.4bn (+172% y-o-y, 80,000 120 +120% q-o-q). Domestic/overseas sales of the successful series 60,000 100 40,000 ‘Mr. Sunshine’ boosted its leverage. We estimate the series’ gross 20,000 80 profit (including sales to Netflix) at KRW14.9bn (GPM of 24%). 0 60 Nov-17 Jan-18 Mar-18 May-18 Jul-18 Sep-18 Stock price(LHS,KRW) Rel.