Krafton becomes Korea’s top game stock on positive earnings outlook

Krafton Inc.‘s “PlayerUnknown’s Battlegrounds (PUBG)” [Photo provided by Krafton]

The stocks of Krafton Inc. and NCSoft Corp., the two major game publishers in South Korea, are mixed as investors assess differently of their new releases and recovery in overseas sales.

According to the Korea Exchange on Thursday, shares of Krafton closed at 194,500 won ($146.31), up 1.09 percent from the previous trading day. The company’s stock price has gained 15.77 percent since the end of last year. Foreign investors and institutions have net bought Krafton shares worth 80.7 billion won and 30.5 billion won, respectively since Krafton’s launch of its new mobile game “Road To Valor: Empires” in India on April 17.

During this period, the stock gained 24.6 percent, allowing Krafton’s market capitalization to surpass that of NCSoft for the first time in three months on March 22.

The news that Krafton’s flagship game “PlayerUnknown’s Battlegrounds (PUBG)” may resume service in India, which was suspended last year, also contributed to the recent share price gain.

Korea Investment & Securities Co. forecast Wednesday that Krafton sales could rebound following the service resumption in India.

“What is positive is Krafton’s plan to resume its Indian business as early as in the first half of this year and recover its previous quarterly sales of some 30 billion won in the second half,” said Kim Hyun-yong, an analyst at Hyundai Motor Securities Co.

Several new games are also expected to be released next year.

“Four new games are due to be released by Krafton next year and expectations for the new games could be reflected in the stock price from the second half of this year,” said Jung Ho-yoon, an analyst at Korea Investment & Securities.

Krafton’s plan to buy back shares is another positive factor. The company said on March 28 that it will buy back 169.7 billion won worth of its own shares and retire them all this year. It plans to cancel more than 60 percent of the shares to be bought back in 2024 and 2025 to enhance shareholder value.

Some analysts predict that Krafton’s share price has already fallen enough to reflect all the bad news and may rebound in the future.

NCSoft Corp.‘s “Lineage W” [Photo provided by NCSoft]

In contrast, NCSoft’s stock price has been on the fall as users of its flagship game “Lineage” series are leaving. NCSoft has also pushed back the release of a new game from the first half of this year to next year.

NCSoft’s stock price has lost 17.08 percent since the end of last year, driven by net selling by institutional investors. Institutions have sold a total of 138.4 billion won worth of shares so far this year.

The company’s stock price has been falling since the release of its highly anticipated new game was pushed back from the first half of this year to next year.

In the first quarter of last year, the company’s operating profit tripled on year as sales of its new game “Lineage W” began in earnest. In the second half of last year, its stock price grew 28.1 percent due to expectations of the release of its new MMORPG “Throne & Liberty (TL),” which was scheduled to be released in June this year. However, with TL’s release delayed to the second half of the year, the company’s first-quarter earnings are expected to have plummeted.

NSCsoft’s first-quarter earnings are also expected to be sluggish due to the decline in the sales of its flagship Lineage series.

The company’s revenue from “Lineage W” and mobile game “Lineage 2M” is estimated to have declined by 20 percent and 15 percent, respectively, in the first quarter from the previous quarter. As a result, the company’s first-quarter revenue and operating profit are estimated to have plunged 35.53 percent and 79.77 percent on year to 509.5 billion won and 49.4 billion won, respectively.