[Edaily Reporter Kim Hyung-il ] Entertainment stocks are looking for a catalyst to rebound. While the stock prices of major entertainment agencies rose in unison after JYP Entertainment Corporation(035900)(JYP Entertainment) reported third-quarter earnings that exceeded market expectations, profit growth outlooks for next year varied by company. The market is focusing less on short-term earnings and more on the monetization of new intellectual property (IP) to fill the gap left by the hiatus of flagship artists, as well as the sustainability of profit improvements.

According to the securities industry on the 14th, JYP Entertainment rose 16.54% on the 12th, while SM ENTERTAINMENT CO., Ltd.(041510)(SM Entertainment) rose 6.17%, HYBE(352820)rose 5.35%, and YG Entertainment Inc.(122870)(YG Entertainment) rose 4.99%. This is interpreted as buying momentum spreading across the entertainment sector as JYP’s strong earnings boosted investor sentiment. However, given that entertainment stocks have generally underperformed this year, it is too early to conclude that a single day’s rebound marks a trend reversal. The key to restoring investor confidence lies in whether the sector can sustain its growth momentum even after the activities of major artists are reflected in earnings.

Yuanta Securities Korea estimated HYBE’s consolidated operating profit for next year at 507.6 billion won. This represents a 59.1% increase from this year’s forecast of 319 billion won. SM is expected to see an 18.1% increase to 201.7 billion won, while JYP is projected to rise 6.9% to 147 billion won. In contrast, YG’s operating profit is forecast at 68.3 billion won, with growth limited to just 0.9%.

There is also a discrepancy between revenue growth rates and profit growth rates. While HYBE’s revenue is expected to decline by 10% to 4.591 trillion won next year, its operating profit margin is projected to rise from 6.3% this year to 11.1%. Analysts predict that despite a decline in revenue from album sales, concerts, and merchandise (MD) due to the conclusion of BTS’s tour in the first half of the year, profit improvement will be driven by the base effect from one-time expenses in the first quarter of this year and a decrease in the SG&A ratio. The expansion of concert scales for newer IPs such as “Cortés” and “KATSEYE,” along with the monetization of the MD business, were also cited as key factors.

SM is projected to see revenue and operating profit increase by 9.6% and 18.1%, respectively, next year, with the operating profit margin improving from 13.8% to 14.9%. The expansion of concert tours by RIIZE and NCT WISH, along with high-margin merchandising and licensing businesses, are key growth drivers. Cost savings in content production through AI and operational efficiency improvements at subsidiaries were also cited as factors contributing to improved profitability. Since third-quarter sales of new albums fell from 5.5 million units in the same period last year to 1.67 million units, whether sales recover following the release of new albums in the fourth quarter remains a short-term variable.

JYP’s third-quarter operating profit of 48 billion won exceeded market expectations by 16.7%. Increased album sales by Stray Kids in Western markets drove these results. EUGENE INVESTMENT & SECURITIES raised its target price by 10%, from 50,000 won to 55,000 won, reflecting Stray Kids’ stadium tours in Japan, North America, and Europe scheduled to begin in the second quarter of next year. Next year’s operating profit margin is projected to improve slightly to 17.3% from this year’s estimated 17.1%. However, the firm cited the military enlistment of some members and the possibility of a hiatus in full-group activities until 2028 as potential headwinds.

YG is expected to see limited profit growth next year as well. Yuanta Securities Korea projected that revenue will decline by 5.5% next year due to a base effect from Big Bang’s 20th-anniversary activities, which will lead to a decrease in concert and royalty revenue. While operating profit is expected to increase by only 0.9%, the operating profit margin is estimated to improve from 10.9% to 11.6%. Although an expansion of BABYMONSTER’s world tour and the debuts of new boy and girl groups are scheduled, analysts suggest that a full-scale revaluation of the stock price will likely only occur after the tour’s performance and the success of the rookies are confirmed.

In addition to earnings forecasts, valuation is another key indicator for making investment decisions on individual stocks. EUGENE INVESTMENT & SECURITIES projects JYP’s 2027 price-to-earnings ratio (PER) at 12.2x. Earnings per share (EPS) are estimated at 3,185 won, a 17.2% increase from this year, with a dividend yield of 1.6%. However, since it is difficult to compare the valuations of the four companies based on the same criteria using only this report, it is necessary to examine not only earnings growth rates but also changes in future earnings estimates and stock price reactions.