by Considering that the growth of the entertainment industry will continue, there is an opinion that the weight of related stocks should be increased. Contrary to some concerns, the increasing influence of K-pop in the global market is confirmed as an indicator. Among the entertainment stocks, JYP Entertainment and SM are analyzed to be the most promising.
On the 24th, Cape Investment & Securities presented an opinion to increase the weight of the entertainment industry, saying that the expansion of K-pop’s fandom was confirmed. According to Cape Investment & Securities, sales of K-pop albums have continued to grow rapidly since 2019.
The compound annual growth rate (CAGR) for the three years from 2019 to last year is 72%. This year’s sales volume is 80% of last year’s annual performance as of July, and this year is expected to grow by more than 20% compared to the previous year.
The global spread of K-pop demand seems to have led to an increase in album sales. Over the past three years, K-pop album sales in the United States, Japan, France, the Netherlands, and Germany have recorded an average annual growth rate of at least 55% to over 100%.
The specificity of K-pop albums also contributed to the increase in sales. In the K-pop artist fandom, there is a tendency for one person to purchase multiple albums because of random marketing and ownership of the album as an MD product. In addition to new albums, sales of older albums that have been released for more than six months are also increasing. It is presumed that this is because new fans are buying past albums.
The increase in frequency on the Billboard chart is also a sign of K-pop’s expanding global influence. Five K-Pop groups charted on the Billboard 200, including BTS became the first K-Pop artist to top the charts in 2018, and 11 groups have made it this year so far. BTS was the only group in the top 10 in 2018, but there are nine this year.
Park Hyung-min, a researcher at Cape Investment & Securities, said, “It is no longer surprising that K-pop artists have entered the Billboard chart. In addition, it is predicted that the virtuous cycle structure in which rising awareness and fandom spread in the Americas will increase the frequency of Billboard charts, increase additional recognition, and expand fandom is highly likely to continue.
The number of performances and the number of audiences in non-Asian countries are also increasing. The number of non-Asian tours of BTS was 9 times in 2017, 22 times in 2018, 12 times in 2019, and 8 times last year.
The number of guests per performance increased from 14,000 in 2017 to 55,000 last year. Twice performed 4 times in 2019 and 9 times this year, attracting 40,000 and 145,000 audiences, respectively.
Blackpink gathered 120,000 and 760,000, respectively, performing 13 times in 2019 and 18 times this year. Researcher Park emphasized, “There are some concerns about the scalability of K-pop fandom, album sales, and YouTube indicators, etc., but this year, it is confirmed that K-pop is still in a growth phase for individual artists and industries as a whole.”
Among the entertainment stocks, JYP Entertainment and SM were selected as our top picks. JYP Entertainment analyzed that the effect of an expanded fandom in album sales, MD sales, and concert scale is showing and that the artist lineup will be consolidated as four groups are scheduled to debut next year.
Operating profit this year is expected to increase by 73% from last year to 100.1 billion won. As an investment point, SM suggested that low-end performance is expected due to uniform album sales and tour activities in the main lineup in the second half of the year and that NCT’s high growth will continue next year as an investment point.
It was also positive that Espa’s growth was remarkable and that the subsidiary’s turnaround could begin in earnest with full-fledged performances. Operating profit for this year is expected to increase by 46% to 98398.3 billion won.
