[Edaily Reporter Kim Hyung-il ] EUGENE INVESTMENT & SECURITIES raised its target price for Kakao Games Corp.(293490)by 57.9%, from 7,600 won to 12,000 won, citing the success of the new game “The World of Goblins,” the consolidation of Me2on Co., Ltd. into its consolidated financial statements, and the upcoming release of its in-house title “Odin Q: Summoning of the Valkyries” in January of next year. The investment rating was maintained at “Hold” (HOLD), as the profit contribution from *The World of Goblin* is expected to be limited and the success of *Odin Q* still needs to be confirmed.

On the 5th, Jeong Ui-hoon, an analyst at EUGENE INVESTMENT & SECURITIES, stated, “With the third quarter of this year marking the low point, Kakao Games Corp.’s earnings trajectory has entered a phase of clear improvement,” adding, “The company has reaffirmed its ability to deliver hit titles with *The World of Goblins*, and the likelihood of returning to profitability in the first quarter of next year has increased thanks to the consolidation of Me2on Co., Ltd. and the launch of *Odin Q*.”

However, he pointed out that the success of *Odin Q* is crucial for a substantial improvement in profitability. Analyst Jeong added, “Since *The World of Goblins* is a published title, its contribution to Kakao Games Corp.’s profits remains limited despite its success,” and noted, “We are raising our target price by applying a target price-to-earnings ratio (PER) of 18 times to next year’s projected earnings per share (EPS) of 672 won, but this is contingent on confirming the performance of *Odin Q*.”

In the third quarter of this year, Kakao Games Corp.’s revenue totaled 69.1 billion won, down 8% from the previous quarter and 46% year-over-year. The company continued to post a loss, with an operating loss of 26.3 billion won. Revenue fell short of the market consensus of 76.4 billion won due to a continued lack of new releases. The operating loss widened by 3.3 billion won from the previous quarter due to pre-launch marketing expenses for *The World of Dokkaebi*, but was generally in line with market expectations of 25.9 billion won.

Mobile revenue totaled 50.6 billion won, down 4% from the previous quarter and 40% year-over-year. This was due to the continued absence of new titles and the natural decline in existing games. However, domestic revenue for the flagship title *Odin* showed a robust trend, with both traffic and revenue increasing compared to the previous quarter, even amid the release of competing new massively multiplayer online role-playing games (MMORPGs).

PC revenue totaled 18.5 billion won, down 17% from the previous quarter and 57% year-over-year. This was largely due to the off-season for promotions of *PlayerUnknown’s Battlegrounds*, which accounts for the majority of PC revenue. EUGENE INVESTMENT & SECURITIES projected that a major collaboration update in the fourth quarter, the Steam Early Access launch of *ArcheAge Chronicles*, and the official release of *Path of Exile 2* in December would contribute to a rebound in PC revenue.

Operating expenses totaled 95.4 billion won, down 3% from the previous quarter and 28% year-over-year. As the trend toward operational efficiency continued, personnel expenses decreased compared to the previous quarter, and commission expenses also declined due to lower revenue. In contrast, marketing expenses rose 76% quarter-over-quarter to 6.2 billion won. This reflects pre-launch marketing costs for *The World of Dokkaebi*, and marketing expenses are expected to rise further in the fourth quarter due to campaigns for *The World of Dokkaebi* and *Odin Q*.

The primary driver of the earnings rebound is *The World of Goblins*. Since its launch, the game has ranked first in revenue on major app stores and continues to maintain a steady trend in both revenue rankings and traffic. Notably, by exercising restraint in early monetization, the company has built a broad revenue base centered on small-to-medium spenders rather than a handful of high-spending users. This is why analysts suggest that, even if its initial popularity grows more gradually than that of existing *Lineage-like* games, it has the potential to sustain its success over the long term.

The consolidation of Me2on Co., Ltd. is also expected to contribute to revenue growth. Kakao Games Corp. invested approximately 99.6 billion won in Me2on Co., Ltd. to secure a 39.6% stake. EUGENE INVESTMENT & SECURITIES forecasts that revenue will begin to rebound starting in the fourth quarter, as the earnings contribution from *The World of Goblins* is fully reflected and the effect of Me2on Co., Ltd.’s consolidation is added.

In January of next year, the highly anticipated title *Odin Q: Summoning of the Valkyries* is scheduled for simultaneous release in South Korea, Taiwan, and Japan. Based on this, Kakao Games Corp. has set a goal of returning to operating profit in the first quarter of next year. Subsequent releases of new titles such as *God Save Birmingham*, *Chrono Odyssey*, and *ArcheAge S* are also scheduled, and the possibility of *Odin* receiving a foreign game license in China is cited as an additional source of momentum.