[Alpha Biz= Reporter Kim Sangjin] KB Securities Lowers Target Price for Studio Dragon to 49,000 Won, Maintains 'Buy' Rating Amidst Reduced Earnings Estimates.
On the 23rd, KB Securities reduced its target price for Studio Dragon from 52,000 won to 49,000 won, reflecting a 5% decrease due to lower earnings estimates. The brokerage maintained its 'Buy' rating.
KB Securities revised its earnings estimates for Studio Dragon, lowering its projected operating profit for this year and next from 54.8 billion won and 70.5 billion won to 51.2 billion won and 64.3 billion won, respectively.
The firm identified challenges in the drama industry, including a slowdown in growth due to reduced investment from video streaming and TV sectors, as well as increased costs for actor fees.
KB Securities acknowledged Studio Dragon's strategy to reduce dependency on captive (affiliate) clients as positive but noted slow growth in non-captive (independent) clients.
The brokerage emphasized the need for Studio Dragon to enhance its negotiating power with Netflix and increase its share of new channels to secure growth in non-captive clients. It also stressed the importance of improving the terms of Netflix contracts as they near expiration.
KB Securities pointed out that Studio Dragon's content share on Netflix is currently 3%, but its proportion of Netflix's annual investment is only 1%.
For profitability, KB Securities suggested controlling production costs by working with new actors and selectively producing high-potential, profitable overseas content.
Alphabiz Reporter Kim SangJin(letyou@alphabiz.co.kr)
