IBK Investment Cuts YG Entertainments Target Price Amid Performance Concerns
IBK Investment Securities has lowered the target price for YG Entertainment from 120,000 KRW to 100,000 KRW due to rising concert costs and lackluster merchandise (MD) sales which caused the companys third-quarter performance to fall below market expectations. However, considering the potential comeback of Big Bang, the firm believes there is little chance for further declines in the stock price, maintaining a Buy recommendation.
Kim Yoo-hyuk, a researcher at IBK Investment Securities, noted that the performances of Treasures new album, BLACKPINKs stadium tour, and Baby Monsters North American tour have all contributed to a significant increase in both revenue and operating profit compared to the previous year. He also mentioned that YG Investments profit of 7.6 billion KRW was included in the results, but he emphasized that the rise in concert costs and disappointing MD sales were the main factors behind the performance shock.
In the third quarter, YG Entertainment reported revenue of 173.1 billion KRW, marking a 107.2% increase year-on-year. Operating profit surged by 272.3% to reach 31.1 billion KRW, although this still fell short of the market expectation of 34 billion KRW. IBK Investment Securities has revised its annual operating profit estimates for YG Entertainment downwards for 2025 and 2026, projecting 72.4 billion KRW and 85.5 billion KRW, respectively, which is a reduction of 17.2% and 11.6% from previous estimates.
Despite the lowered forecasts, the potential for a decline in stock prices is viewed as minimal. Kim stated, "With BLACKPINK, Baby Monster, and Treasure leading the charge, YG Entertainments performance is expected to improve. There is also a possibility of Big Bang making a comeback in 2026 to celebrate their 20th anniversary. If Big Bang returns, it could significantly raise performance estimates." Big Bang is scheduled to perform at the Coachella Festival in April next year.
Kim Yoo-hyuk, a researcher at IBK Investment Securities, noted that the performances of Treasures new album, BLACKPINKs stadium tour, and Baby Monsters North American tour have all contributed to a significant increase in both revenue and operating profit compared to the previous year. He also mentioned that YG Investments profit of 7.6 billion KRW was included in the results, but he emphasized that the rise in concert costs and disappointing MD sales were the main factors behind the performance shock.
In the third quarter, YG Entertainment reported revenue of 173.1 billion KRW, marking a 107.2% increase year-on-year. Operating profit surged by 272.3% to reach 31.1 billion KRW, although this still fell short of the market expectation of 34 billion KRW. IBK Investment Securities has revised its annual operating profit estimates for YG Entertainment downwards for 2025 and 2026, projecting 72.4 billion KRW and 85.5 billion KRW, respectively, which is a reduction of 17.2% and 11.6% from previous estimates.
Despite the lowered forecasts, the potential for a decline in stock prices is viewed as minimal. Kim stated, "With BLACKPINK, Baby Monster, and Treasure leading the charge, YG Entertainments performance is expected to improve. There is also a possibility of Big Bang making a comeback in 2026 to celebrate their 20th anniversary. If Big Bang returns, it could significantly raise performance estimates." Big Bang is scheduled to perform at the Coachella Festival in April next year.
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