HYBE’s Price Target Cut 18.2% to 270,000 Won… A Buying Opportunity After BTS Hiatus

Portfolio diversification stands out amid generational transition challenges in the entertainment industry

On the 22nd, Korea Investment & Securities cut its price target for 'HYBE' by 18.2%, from 330,000 won to 270,000 won, reflecting market concerns about a hiatus in 'BTS' (BTS) activities after the first half of next year. The previous day's closing price was 183,000 won.

In a report, Jung Ho-yoon, a researcher at Korea Investment & Securities, forecast that 'HYBE' would post operating profit of 169.7 billion won in the third quarter, in line with the market estimate of 162.9 billion won. By segment, album and music sales and concert revenue are projected to surge 47.8% and 181.0%, respectively, from a year earlier, while merchandise sales are estimated to rise 95.0%.

However, structural problems across the entertainment industry are weighing on the sector. Jung said, "The high revenue contribution from artists of the previous generation, who have built up years of experience, is paradoxically becoming a risk," adding, "The absence of any new artist currently classified as fifth-generation who has fully surpassed the influence of the previous generation is raising questions about the entertainment industry's sustainable growth." Market anxiety over a gap in activities following 'BTS' was identified as the main reason for the valuation decline.

Accordingly, Korea Investment & Securities lowered the valuation multiple it applies to 'HYBE' from 30 times to 25 times.

Despite this, 'HYBE''s medium- to long-term growth drivers remain intact, the report said. Jung said, "'HYBE' is achieving successful portfolio diversification, with boy groups including 'CORTIS', '&TEAM', 'TXT' (TOMORROW X TOGETHER) and 'BOYNEXTDOOR', as well as younger girl groups such as 'LE SSERAFIM', 'ILLIT' and 'KATSEYE', all growing steadily."

While a temporary pause in 'BTS' activities after the first half of next year is a headwind, the report said a diversified artist lineup should make it possible to steadily cushion earnings over time.

Jung said, "The valuation burden on 'HYBE' is now lower than ever," and advised that "rather than focusing on short-term concerns, this is the time to gradually look for buying opportunities from a medium- to long-term perspective." He maintained his 'Buy' rating.