PUBG PC revenue halved ... Krafton Inc.'s price target cut from 400,000 won to 300,000 won

[Financial News] Hanwha Investment & Securities Co., Ltd. cut its price target for Krafton Inc. by 25%, from 400,000 won to 300,000 won. The move followed weaker-than-expected PC revenue from its flagship game, ‘PUBG: BATTLEGROUNDS (PUBG),’ in the third quarter, which left results below market expectations, as well as a substantial reduction in its net profit forecast for next year. However, analysts say the stock could still rebound, with a 10th-anniversary event for PUBG and the release of five new games planned for next year. The firm maintained its ‘Buy’ rating.
Kim So-hye, an analyst at Hanwha Investment & Securities Co., Ltd., said on the 11th, “Third-quarter results fell short of the consensus estimate for operating profit as PUBG PC revenue was weaker than expected.” She assessed, “This is a period when factors supporting a rise in the share price will be reflected more strongly than concerns.”
Krafton Inc.'s third-quarter revenue rose 11.6% year over year to 971.4 billion won, but came in 13.4% below market forecasts. Operating profit fell 35.5% to 225 billion won, 17.5% below the market forecast of 272.6 billion won. PC revenue plunged 57.4% from the previous quarter. The impact of the Jujutsu Kaisen collaboration was partly reflected, but an overall decline in paid content also weighed on results.
Mobile revenue, by contrast, rose 14.8% from the previous quarter to 504.3 billion won. Collaboration events with Naruto and Ferrari drove user inflows and a rebound in revenue. However, foreign-currency-related losses stemming from a weaker dollar resulted in a net loss of 68.4 billion won.
Analyst Kim said, “We expect to recoup some of the weak third-quarter PC revenue in the fourth quarter, thanks to planned collaboration events with Bentley Motors Limited and IVE, as well as PvE and new modes.”
Hanwha Investment & Securities Co., Ltd. forecast Krafton Inc.'s operating profit for next year at 1.489 trillion won. That is 5.8% below its previous estimate, but 10.2% higher than the estimate for this year. It cut its forecast for net income attributable to controlling shareholders by 32.7% from its previous estimate.
Analyst Kim forecast, “Most estimates for the new-game lineup have yet to be factored in, so once some results become evident, earnings estimates could be revised upward substantially.”
She added, “At around 11.5 times on a next-year basis, the valuation is unquestionably at an accessible level.” She forecast, “A gradual recovery in the company's valuation will emerge as users return in response to a large-scale 10th-anniversary event and the new-game lineup takes shape.”
[email protected] Bae Han-geul Reporter