"Is It Time to Buy HYBE Again?"... Securities Firms Abuzz as 2.72 Million Flock to 'Cats Eye' [Weekend Money]

KB Securities Selects HYBE as Top Pick Among Entertainment Stocks
"Growth Expected from Localized Idols Led by Cat's Eye"

While the entertainment sector is expected to show sluggish performance in the third quarter, a securities report has been released forecasting growth for HYBE, led by the global girl group ‘Cats Eye’.

Global girl group 'Cats Eye' official YouTube channel.

Choi Yonghyun, a researcher at KB Securities, stated, “Third-quarter results for entertainment companies are generally expected to be weak. HYBE is likely to meet market expectations, but JYP Entertainment, SM Entertainment, and YG Entertainment are projected to fall short of those expectations.” KB Securities selected HYBE as their top pick in the sector.

KB Securities estimates third-quarter operating profit at 169 billion won, a decrease of 1.1% compared to the same period last year. Album sales are estimated at 7.7 million units, down 30% from the previous quarter, while concert attendance is projected at 2.8 million, up 57.9% over the same period. However, despite the increase in concert attendees, the impact on operating profit appears limited due to exchange rate effects and the burden of higher fixed costs from an increased number of concerts.

However, the point of interest for HYBE is its growth potential through the localization of idol groups, including Cats Eye. The number of Cats Eye listeners on Spotify, the world’s largest music streaming platform, increased by 2.72 million, and YouTube subscribers grew by 2.9 million.

Researcher Choi said, “HYBE maintains a meaningful market share domestically and is expanding overseas by launching local idol groups. HYBE’s mid-to-long-term strategy remains unchanged. Not only Cats Eye, but also the Latin pop group Santos Bravos, is building a fandom, and next year HYBE plans to debut one male and one female localized idol group and an Indian idol group as well.” He added, “The success of these localized idol groups is expected to open up new markets and have a positive impact on the stock price.”

For SM Entertainment, operating profit is expected to fall short of market expectations, coming in at 38.1 billion won compared to a consensus of 39.8 billion won. This is attributed to a 69% quarter-on-quarter drop in album sales (1.7 million units) and a 7% decrease in concert attendance (430,000 people).

Researcher Choi explained, “Compared to competitors, SM Entertainment has a lower dependence on specific idol groups, which limits earnings volatility. However, the revenue generated per idol group is not high as the company’s activities remain focused on Asia. If SM Entertainment expands into Western markets or develops business in China using its joint venture with Tencent, growth potential could trigger a stock revaluation.”

Yonhap News Agency

JYP Entertainment’s operating profit is expected to be 39.4 billion won, down 3.3% from the same period last year and 12% below market expectations. Although album sales are projected to rise 105% quarter-on-quarter to 4.8 million units, concert attendance is forecast at 800,000, a 17% decrease from the previous quarter.

YG Entertainment’s operating profit is estimated at 180.1 billion won (down 41.9% year-on-year), which is 17.6% below market consensus. For the third quarter, album sales are estimated to hit 100,000 units (down 95.2% from the previous quarter), while concert attendance is expected to surge to 750,000 people (up 602.3% quarter-on-quarter).

KB Securities judged that the stock prices in the entertainment sector have hit rock bottom. As of the closing price on September 30, HYBE stood at 156,900 won, SM Entertainment at 82,200 won, JYP Entertainment at 37,650 won, and YG Entertainment at 43,200 won. Researcher Choi commented, “The valuations of the four main entertainment companies are all near historical lows. If additional growth becomes visible, the shares could rebound. However, if the activity levels of key idol groups turn out to be lower than current market expectations, further downward revisions in earnings estimates could result in additional share price declines.”

KB Securities set HYBE’s target price at 280,000 won (lowered), SM Entertainment at 100,000 won (maintained), JYP Entertainment at 50,000 won (lowered), and YG Entertainment at 60,000 won (maintained). Regarding the downward adjustment of HYBE’s target price, the brokerage explained, “We revised this down by 10.1% reflecting an anticipated decrease in overseas earnings due to a stronger won, as well as a larger-than-expected burden of fixed costs from smaller-scale, early-year world tours, both of which led to a lower operating profit forecast for this year.”

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