HYBE saw a decrease in album sales in the first quarter of 2021, potentially affecting the total sales and operating profit. But a researcher said that comebacks of BTS, SEVENTEEN, and other artists will help improve the earnings in the second quarter.
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On April 22, media outlets reported that HYBE's earnings in the second quarter of this year will grow with the help of Ithaca Holdings and comebacks of K-pop artists like BTS, SEVENTEEN, NU'EST, and GFRIEND, according to a researcher of KB Investment & Securities.
HYBE's 2021 1st Quarter Sales and Profit Expected to Be Lower Than 2020 1st Quarter
Researcher Lee Sun Hwa shared that they maintained the Buy rating and target price of HYBE to 305,000 won. Lee continued that they expect the sales and profits of HYBE (formerly Big Hit Entertainment) to be lower than last year as there has been a decrease in album sales in the first quarter of 2021.
Lee shared that they predict the agency's sales to decline by 44.4% compared to its sales in the same period last year. The label is said to only earn 173.7 billion won in sales from its 1st quarter performance. As for the operating profit, it will drop by 57.3% and HYBE will only gain 22.4 billion won.
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The company's operating profit is below the market forecast (26.6 billion won), excluding the expenses of five billion won for the relocation of the new office building. The profit, however, is in line with the consensus.
The researcher then said that HYBE's album sales in the first quarter were 1.18 million, which is down by 61% compared to the same period in 2020. Although there were no comebacks of major artists, the base was formed by the release of BTS's "Map of the Soul: 7" in February last year.
Sun Hwa added that the first quarter of this year is an important time to check HYBE's basic physical strength, especially since the company has started a new era.
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The KB Investment & Securities researcher further stated that amid the absence of performance activities due to the ongoing COVID-19 pandemic, sales from MD/licenses, various content, fan club membership, etc. are expected to reach 66% total sales at about 154 billion won.
Lee Sun Hwa continued, "As the proportion of indirect participation-type sales for artists with high margins increases, we expect good operating profit despite incurring costs of five billion won for relocating the office building."
HYBE's Sales and Profit Predicted to Increase through Comebacks of BTS, SEVENTEEN, & More
Lee then said that groups like BTS, SEVENTEEN, NU'EST, and GFRIEND, who are scheduled to make a comeback in the second quarter of 2021, will have a huge contribution to the upcoming sales and profits of HYBE considering that they are some of the major artists in K-pop.
Besides comebacks, the researcher added that earnings of Ithaca Holdings are expected to be a significant factor starting from May. Additional sales of 120 billion won and operating profit of 40 billion won from Ithaca Holdings will reflect to HYBE's 2021 earnings. It is highly likely to be incorporated into MSCI Korea in May, so it is forecast to have a positive impact on short-term supply and demand.
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Written by Mhaliya Scott
