Korean Entertainment stocks to get boost in 2023 on global K-pop fandom

Four entertainment giants in Korea [Sources : Hybe Co., SM Entertainment Co., JYP Entertainment Corp. and YG Entertainment Inc.]

Entertainment stocks in South Korea are expected to gain momentum next year on improved earnings as offline concerts resume, global fandom grows and China may lift a ban on Korean culture.

Four entertainment giants in Korea - Hybe Co., SM Entertainment Co., JYP Entertainment Corp. and YG Entertainment Inc. - are projected to post a combined operating profit of 524.8 billion won ($409.9 million) next year, up 8.32 percent from 484.5 billion won estimated for this year, according to financial data firm FnGuide on Sunday.

“K-pop idol concerts were held at larger scale this year and robust album sales showed strong loyalty of idol fandom,” said Park Ha-kyung, an analyst at Korea Investment & Securities Co. “(Entertainment agencies will be able to) generate more profit from the global fandom next year on more diverse offline and online contents.”

Entertainment stocks are expected to gain momentum next year on strong fandom despite concerns of slowing economy.

“Entertainment sector is less sensitive to the economy as it is based on fandom and it has high financial soundness,” said Ji In-hye, an analyst at Shinhan Securities Co.

K-pop album sales is projected to reach 100 million copies next year, up 16 percent from this year and the number of concert fans around the world is expected to surge 25 percent to 7 million, according to Hyundai Motor Securities Co.

Concert fans in the U.S., in particular, will jump to 2.5 million next year from 1.64 million this year and 700,000 in 2019, said Kim Hyun-yong, an analyst at Hyundai Motor Securities.

FN Guide data showed that operating profit at SM is expected to surge 38.36 percent on year to 123 billion won in 2023 on sales of 924.3 billion won, up 13.96 percent.

JYP Entertainment’s operating profit is also expected to jump 22.72 percent to 123.7 billion won on sales of 414 billion won, up 23.18 percent from this year. YG Entertainment’s operating profit and sales are expected to increase 31.09 percent and 21.13 percent, respectively, to 70 billion won and 505 billion won.

Hybe’s earnings, on the other hand, is projected to fall next year with sales down 3.78 percent to 1.6 trillion won and operating profit 13.79 percent lower at 208.1 billion won on a hiatus of group activities by BTS members. Jin, the oldest member of the K-pop superstar group, began mandatory military service this month.

Financial investment industry sources picked JYP Entertainment as the top industry stock on four new group lineups waiting for debut next year and relatively lower earnings risk. The agency’s sales and operating profit may gain over 30 percent, sources said.

Hybe building [Source : Hybe]

Many brokerages also picked Hybe as a must buy entertainment stock, despite BTS hiatus, as it manages a number of other idol groups that may make up for BTS vacancy like NewJeans, Le Sserafim, Seventeen and TXT.

“Hybe’s sales dependence on BTS fell to 60 percent this year from 92 percent in 2020 on the back of high growth of new idol groups,” said Lee Hwa-jung, an analyst at NH Investment & Securities Co.. “Concerns about BTS have already been reflected in the stock price so other lineups will contribute to a stock boost next year.”

Earnings at SM Entertainment are expected to improve next year on eased equity structure risk as a producing contract with Like Planning ends this year. Like Planning is a private company owned by SM Entertainment founder Lee Soo-man. SM was under fire for favoring the producing company by paying tens of billions of won for work.

YG Entertainment stock will be boosted by its main group Blackpink that will continue its World Tour concert until later next year and boy group Treasure will begin activities in Japan.