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Earnings

S.Korea game sector remains in dark after poor earnings

Share prices of NCSOFT, Kakao Games, Krafton fall; the sector aims to improve earnings with new titles

By Feb 10, 2023 (Gmt+09:00)

2 Min read

NCSOFT's Throne and Liberty
NCSOFT's Throne and Liberty

South Korea’s game publishers reported dismal quarterly earnings, deepening concerns over their outlook this year amid doubts over measures such as new title releases to boost profits.

NCSOFT Corp., the country’s leading game producer, said on Thursday its operating profit tumbled 56.7% on-year to 47.4 billion won ($37.4 million) in the fourth quarter of 2022 on a consolidated basis with sales down 27.6% to 547.9 billion won.

Analysts expected the earnings of the developer of popular massively multiplayer online role-playing (MMORPG) games such as Lineage to weaken further with six local brokerage houses cutting share price targets.

“The company needs to release better-than-expected content or report notable performances in North America and Europe in order for stock prices to be revalued in the future,” said Kang Seoko, an analyst at Shinhan Securities Co.

NCSOFT shares on Friday ended down 4.4% to 428,000 won, far underperforming a 0.5% loss in South Korea’s main Kospi.

RIVALS ALSO SEE WEAK EARNINGS

Stocks of its competitors also skidded. Kakao Games Corp. and Krafton Inc. closed down 2.7% and 2.2%, respectively.

Kakao Games, the distributor of Odin: Valhalla Rising, said its operating profit shrank to 10.8 billion won in the October-December 2022 period, less than a quarter of 45.5 billion won a year earlier. A major mobile game developer Netmarble turned to the red in the three months, contributing to the company’s first annual operating loss in 10 years.

Krafton, the developer of the popular battle royale game PlayerUnknown’s Battlegrounds (PUBG), said its fourth-quarter operating profit nearly tripled to 126.2 billion won from a year earlier. But the profit was lower than 144.6 billion won in the third quarter, 165.8 billion won in the second and 315 billion won in the first.

“The company plans to release new titles that are expected to significantly contribute to higher sales after the second half of 2024,” said Lee Hyo-jin, an analyst at Meritz Securities Co. “It is a pretty long term to withstand the downside cycle of existing games.”

NEW TITLES

Game publishers are set to improve profits by launching new games.

NCSOFT plans to release its masterpiece title Throne and Liberty (TL) in the first half. The company had been originally scheduled to launch the MMORPG last year but postponed it, causing concerns over the company’s business outlook.

Kakao Games' ArchAge War (Captured from ArchAge War website)
Kakao Games' ArchAge War (Captured from ArchAge War website)

Kakao Games decided to introduce the massively multiplayer online game ArchAge War in the near term.

On the other hand, Krafton unveiled plans to continue investments in the deep learning sector and release metaverse-related services within this year.

(Updated with share prices)

Write to Sang-Eun Lee and Han-Gyeol Seon at selee@hankyung.com
Jongwoo Cheon edited this article.
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