"Wemade: Insufficient Profit Scale and Valuation Appeal" - Shinhan

Korea Economic Daily

Summary

Shinhan Investment & Securities maintained a 'neutral' investment opinion on Wemade, analyzing that the company's profit scale and valuation appeal is insufficient.
While there was stock price increase due to the release of 'Legend of Ymir', they reported that performance across various genres is needed for long-term stock price growth.
Wemade's revenue compared to the previous year increased by 41.6% in the fourth quarter, and analysis showed they exceeded market estimates with a turn to operating profit.

Shinhan Investment & Securities maintained its 'neutral' investment opinion on Wemade on the 17th, analyzing that "while new game expectations are reflected in the stock price, the profit scale and valuation appeal are still insufficient." No specific target price was provided.

Analyst Kang Seok-oh of the securities firm stated, "Profit improvement is expected with reduced commission fees due to the Mad Engine acquisition and the addition of new games," but added, "However, with a Price-to-Earnings Ratio (PER) of approximately 20.6x based on this year's estimates, the profit scale is insufficient to show valuation appeal."

He explained, "The stock price rose due to expectations for 'Legend of Ymir' and 'Fantastic Baseball: Japan-US Pro' scheduled for release on the 20th," and added, "As the 'Lineage-like' market demand is expected to decrease, performance across various genres including casual and shooting games will be necessary for mid to long-term stock price growth and valuation expansion."

Wemade's fourth quarter sales last year increased by 41.6% year-over-year to 165 billion won. Operating profit turned positive at 18.1 billion won, exceeding market estimates (-33.6 billion won). This was due to the early recognition of license revenue of approximately 50 billion won, which was initially expected in the first quarter of this year.

Ko Jung-sam, Hankyung.com reporter jsk@hankyung.com

WEMIX