Korean Entertainment Stocks Face Synchronized Target Price Cuts
Key Metrics
- HYBE target price cut: 12.5% (400K → 350K KRW)
- SM target price cut: 11.4% (140K → 124K KRW)
- JYP target price cut: 12.2% (90K → 79K KRW)
- YG target price cut: 17.1% (76K → 63K KRW)
Hanwha Securities has simultaneously lowered target prices for all four major Korean entertainment companies, citing valuation gaps and upcoming business cycle changes. The cuts reflect concerns about near-term earnings adjustments but also acknowledge significant potential in 2028 with major group tours and new artist releases.
Target Price Adjustments
| Company | Current Price (KRW) | Old Target (KRW) | New Target (KRW) | Change (%) |
|---|---|---|---|---|
| HYBE | 206,500 | 400,000 | 350,000 | -12.5% |
| SM | 73,300 | 140,000 | 124,000 | -11.4% |
| JYP | 53,500 | 90,000 | 79,000 | -12.2% |
| YG | 41,150 | 76,000 | 63,000 | -17.1% |
In a report titled "Entertainment, I Can't Stand This Price," Hanwha Securities analyst Lee Gi-hoon explained that the adjustments were made due to the significant gap between current stock prices and target prices across all four companies.
Company-Specific Rationale
For HYBE, the analyst noted that 2027 earnings will be adjusted due to SEVENTEEN's enlistment in 2026 and full group reunion in 2028. However, major tours from SEVENTEEN, NewJeans, aespa, and LE SSERAFIM in 2028 are expected to generate incremental revenue of 500-600 billion KRW.
For the other three companies, Hanwha lowered its target P/E ratio to 22x, applying a 10% discount for SM and JYP, while adding a 10% premium for YG based on 2027 performance excluding Big Bang.
Market Outlook and Catalysts
The Q2 earnings report from HYBE is being viewed as crucial for potential rebounds in entertainment stocks. A strong rebound is expected after August, particularly as HYBE's high BTS revenue concentration may become clearer for the second half of the year.
The analyst noted that NewJeans' potential 4-member comeback in October could serve as a catalyst, given their status as a core 4th generation group. If HYBE can address its undervaluation, other entertainment companies may follow with rebounds.
In the short term, SM appears to be overly undervalued, while YG could see significant upside depending on the performance of its new artists in September.
Watch Points / Risks
- BTS revenue distribution concerns continue to weigh on HYBE
- Near-term earnings adjustments due to member enlistments
- Dependency on specific group performances for catalysts
- Market sentiment toward Korean entertainment sector remains cautious
Source: Asia Economic Daily