“Kakao Games Corp. set for a turnaround next year”... Price target raised to 15,000 won

[Financial News] Mirae Asset Securities raised its rating on Kakao Games Corp. from “Neutral” to “Buy” and lifted its target price from 9,000 won to 15,000 won on the 22nd, saying new game releases and an improved cost structure are expected to return the company to profitability next year.
Im Hee-seok, a researcher at Mirae Asset Securities, said that the company is expected to turn a full-year operating loss of 100 billion won this year into operating profit of 145 billion won next year, successfully returning to profitability. “Expanded supply of new games is a key driver of earnings improvement,” he said.
Mirae Asset Securities expects Kakao Games Corp.’s revenue next year to reach 833 billion won, up 114.8% from this year. It raised its forecast for next year’s operating profit by 154%, from 57 billion won to 145 billion won.
Among the upcoming titles, it highlighted “Odin Q,” scheduled for release in the first quarter of next year. Im said, “With the early commercial performance of ‘Dokkaebi’s World,’ released on the 8th, now confirmed, Odin Q will launch in the first quarter of next year.” He added, “Chrono Odyssey” and “ArcheAge S” are also scheduled for release next year, easing concerns over chronic delays in new game launches.
Im also expected improvements to the cost structure to support an earnings recovery. Kakao Games Corp. is reshaping its business around games by winding down non-core businesses and streamlining its organization. “The company is gradually reducing its staffing and fixed-cost burden,” Im said. “Labor costs as a share of revenue, which surged to around 43% this year, are expected to fall to around 23% next year.”
He also expressed a positive view of investment in casual games. AI-powered ad targeting and automated ad creative production are lowering user acquisition costs and improving revenue efficiency relative to advertising spend, he explained. Kakao Games Corp. plans to diversify its business, currently centered on massively multiplayer online role-playing games (MMORPGs), and secure new sources of profit through its acquisition of Me2on.
Im added, “The investment case rests on the new game and earnings momentum from the launch of Odin Q, profit growth from fundamental improvements, and business diversification through the acquisition of a casual game company.” He said, “As expectations for an earnings rebound next year gather momentum, the company is expected to be revalued.”
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