[Edaily Reporter Kim Hyung-il ] Yuanta Securities Korea maintained its “Buy” rating and target price of 56,000 won for YG Entertainment Inc.(122870). While revenue growth may slow next year, the firm forecasts that the release of intellectual property (IP) from new artists and an increased revenue share from artists with fewer years of experience will drive profitability improvements. It also cited expected growth in concert and merchandise (MD) sales driven by the expanding fanbases of TREASURE and BABYMONSTER as positive factors.

On the 20th, Lee Hwan-wook, an analyst at Yuanta Securities Korea, estimated that YG Entertainment Inc.’s third-quarter revenue would total 169.2 billion won, a 2.2% decrease year-over-year, while operating profit would fall 34.1% to 20.5 billion won. He projected that these figures would generally align with the market consensus of 164.5 billion won in revenue and 20.1 billion won in operating profit.

While a year-over-year decline in earnings is inevitable due to the lack of new album releases, he expects profits to improve significantly quarter-over-quarter due to an increase in offline concert activities.

In the album segment, sales are expected to decline due to the absence of new releases. For the third quarter, TREASURE is estimated to sell 87,000 copies combined from their fourth mini-album and back catalog, while BABYMONSTER is projected to sell 75,000 copies combined from their third mini-album and back catalog. BLACKPINK’s back-catalog sales are expected to be around 10,000 copies. Total album sales are expected to total approximately 170,000 copies, making a year-over-year decline inevitable. However, digital music revenue is projected to grow year-over-year, driven by the success of digital singles by BIGBANG and BABYMONSTER.

In the concert segment, it is estimated that a total of 40 performances—including 18 by TREASURE, 14 by BABYMONSTER, and 8 by BIGBANG—will draw approximately 800,000 attendees. While solid performance is expected due to the success of the tours, analysts predict that profit improvement will be somewhat limited as the proportion of veteran artists continues to rise. In the merchandise division, revenue is projected to grow year-over-year, driven by strong sales of tour-related merchandise, despite a lack of specially curated products such as new album pop-up stores.

In the medium to long term, the launch of new artists is expected to serve as a growth driver. YG Entertainment Inc. plans to unveil new artist IPs in both the first and second halves of the year, with the debuts of one boy group and one girl group scheduled. Analysts note that adding new IPs will reduce reliance on specific artists and strengthen the downside protection for earnings.

The continued sales of existing albums by both TREASURE and BABYMONSTER were also viewed positively. Analysts explained that if the influx of new fans continues, it could lead to an operating leverage effect through expanded concert and merchandise sales. They also projected that an increased revenue share from artists in their early career stages would help improve overall company profitability.

The analyst stated, “Even if a decline in revenue is inevitable next year, there is room for earnings estimates to be revised upward depending on the initial performance of new IPs,” adding, “As the unfavorable supply-and-demand factors that drove the annual stock price decline are easing, and given that concerns about earnings contraction and supply-demand pressures are already reflected in the stock price, the stock offers high investment appeal at its current level.”