Pearl Abyss: Disappointed so far, but can’t wait to see the next games

The author is an analyst at NH Investment & Securities. He can be reached at [email protected] — Ed.

Pearl Abyss stock price has fallen sharply lately due to poor sales of Black Desert M (China). But we look forward to further sales momentum from the planned 4Q22 releases of Crimson Desert and Black Clover.

Drop in sales estimates following the failure of Black Desert M (China)

– While maintaining a buy rating, we are lowering our TP on Pearl Abyss from W125,000 to W70,000. Released in April, Black Desert M (China) shows weak sales. As a result, we have significantly reduced our earnings estimates for 2022 and beyond.

– But, we maintain a buy rating, noting that the company’s share price has already been adjusted by more than 40% due to the failure of Black Desert M (China). Additionally, we note that expectations for the planned year-end launches of Crimson Desert and Black Clover are expected to rekindle in 2H22.

– Although sales of Black Desert M (China) disappointed expectations, the upcoming new titles should still have a positive impact on the company’s share price once the launch schedules are specified. Crimson Desert is a great new console game that has received favorable reviews after the release of several game-related videos. Additionally, the metaverse concept-based DokeV is expected to roll out in 2023 – the related earnings momentum is expected to gradually pick up. highlight.

1Q22 review: earnings are slowing down

– Pearl Abyss announced 1Q22 consolidated sales of 91.4 billion W (-9.4% yy, -22.5% qq) and an OP of 5.2 billion W (-60.4% yy, -79.8% qq), with an OP matching the consensus of 4.4 billion W but showing a steep decline.

– Black Desert sales totaled W70.9 billion (+5.8% YoY), with sales remaining strong even though the game has been in the market for a long time. In addition, advertising spending fell sharply to W8.2 billion (-45.9% YoY, -42.6% Q3), which proved profitable relative to sales.