SM Entertainment Accelerates Next-Generation IP Growth and Greater China Expansion; Target Price Set at 105,000 Won

[Financial News] Samsung Securities said SM Entertainment is expected to continue improving its medium- to long-term performance, driven by the growth of next-generation artists and the expansion of its Greater China business. The brokerage maintained its "Buy" rating and target price of 105,000 won. This is 31.4% higher than the closing price of 79,900 won on the 7th.
In a report released on the 8th, Samsung Securities analyst Choi Min-ha said, "The solid growth of the next-generation artist lineup that will drive medium- to long-term performance is particularly notable, led by Aespa, which has entered a period of global tour expansion, as well as RIIZE, NCT WISH, and Hearts2Hearts."
Choi also noted, "Aespa is scheduled to expand its activities and audience reach through its fourth world tour, which will visit 25 regions from August through February next year." She added, "RIIZE, which attracted 420,000 fans on its first world tour, along with NCT WISH and Hearts2Hearts, is establishing itself as a next-generation growth engine."
The rookie boy group project SMTR25 is scheduled to make its official debut within the year. Having built a meaningful fan base even before its debut through the TV reality program Reply High School and a fan meeting tour, the group is expected to quickly establish itself in the market and begin monetizing its activities after its official debut.
Greater China was also identified as a growth engine. SM Entertainment established the joint venture STE with Tencent Music Entertainment Group (TME) to develop and manage a China-based idol group scheduled to debut within the next two to three years. TME is SM Entertainment’s second-largest shareholder, holding a 9.7% stake. SM Entertainment plans to expand its artists’ activities in China and their intellectual property (IP) reach by leveraging TME’s local platforms and distribution network.
In the second quarter of this year, SM Entertainment opened its first official offline merchandise store in Shanghai, SMTOWN Store Shanghai. As a permanent store rather than a pop-up, it is expected to serve as a hub connecting the brand with its fan base.
The performance of its subsidiaries is also expected to improve. Dream Maker, the company’s performance-production subsidiary, is seeing improved profitability and margins as collaboration with the parent company expands. SM Entertainment Japan is also expected to post higher revenue and earnings, supported by its artists’ active promotions in Japan.
Samsung Securities forecast SM Entertainment’s 2027 consolidated revenue at 1.37 trillion won, up 9.7% from the previous year, and operating profit at 217.1 billion won, an increase of 18.1%. Choi said, "This is the time to focus not on short-term earnings volatility but on the company-wide underlying earnings strength, which is undergoing a structural upgrade."
[email protected] Lee Jung-hwa Reporter