[Click e-Stock] "SM Entertainment's Strong IPs... Growth Needed in North America"

Coverage Initiated with a Target Price of 110,000 Won

Sangsangin Securities, on September 14, set the target price for SM Entertainment at 110,000 won, which is 31.0% higher than the closing price on September 11, and suggested a "Buy" investment rating.

Lee Nara, a researcher at Sangsangin Securities, explained, "SM Entertainment has secured a large number of intellectual properties (IP) ranging from established to newer ones and is actively promoting various solo and unit activities. As a result, it is unlikely that a hiatus in activities for a particular IP will lead to a company-wide performance gap." She added, "The rapid growth of newer IPs such as aespa, RIIZE, NCT WISH, and Hearts2Hearts, along with the stable operations driven by the SM 3.0 multi-production system, is expected to support steady performance growth."

However, Sangsangin Securities noted that it is necessary for the company to expand beyond its existing focus on the Asian market. The researcher projected SM Entertainment's standalone sales for 2026 at 840.9 billion won, a 3.5% increase compared to the previous year, and forecasts sales in 2027 to reach 885.7 billion won. She explained, "While stable performance growth is possible based on high brand recognition in Asia, it is difficult to expect significant expansion in overall scale." Nevertheless, she anticipated that SM Entertainment's standalone operating profit would improve to 163.8 billion won in 2026 and 189.1 billion won in 2027, driven by the expanding sales contribution of newer IPs.

According to Lee, "The key investment points going forward will be the pace at which new IPs are monetized and whether there is additional growth in the North American market." A new boy group is scheduled to debut in the second half of the year, and even before their official debut, they have been holding fan meetings in four countries, already building a fandom. Accordingly, she believes this new group will contribute to sales faster than existing boy group IPs like RIIZE and NCT WISH.

Lee also emphasized, "Expanding the North American fandom for newer IPs, including aespa, is also important. If rapid monetization of new IPs and the expansion of fandom in North America translate into concert and other sales, additional top-line growth based on these new markets can be expected."

This content was produced with the assistance of AI translation services.