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Now is the time to buy

1Q23 review: Consensus beat

Revenue and OP beat consensus by 10% and 48%, respectively

• For 1Q23, Nexon Games announced revenue of W52.2bn (+172% YoY) and operating profit of W12.7bn (turning to profit YoY), topping consensus expectations.

• Mobile revenue increased 116% YoY to W41.3bn, 10% above our estimate. We estimate Blue Archive revenue surged 102% YoY to W27.4bn, following its Japanese two-year anniversary update.

• PC revenue was W10.5bn, 15% above our estimate, helped by the rebound of Sudden Attack.

• Operating expenses were W39.4bn (+91% YoY), in line with our expectation. Labor expenses were the only cost item that sequentially increased (+7% QoQ).


2023F revisions: +16% for revenue and +169% for OP

Revising up Blue Archive revenue estimate for existing regions

• For 2023, we forecast revenue at W211bn (+60% YoY) and operating profit at W41bn (+705% YoY).

• Blue Archive user traffic in Japan (which saw an increase following the two-year anniversary update) remains robust. Monthly downloads in Japan are also over 70,000, two to three times the prior-year level.

• We revise up our 2023 daily revenue forecast (gross) for Blue Archive by 30% from W700mn to W900mn.

• The title’s 1.5-year and two-year anniversary updates (2Q23 and 4Q23, respectively) in other regions should also have positive effects.

• For Blue Archive in China, our 2024 daily revenue forecast remains unchanged at W800mn.


Lift TP by 11%

Maintain Buy and lift TP by 11% to W29,000

• We adjust up our 2024F EPS by 11% and keep our target P/E of 25x (vs. 17.5x currently) unchanged. We continue to recommend the stock as our top pick in games.

• We believe Nexon Games is currently the most compelling domestic gaming company, given: 1) momentum from new title releases; 2) the likelihood of success in China; and 3) the potential for strong operating leverage effects in 2024.

• Even without any special marketing campaign, Blue Archive pre-registrations in China have surpassed 1.55mn.

• Once marketing gets fully underway, pre-registrations should rapidly increase, boosting new title momentum.