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Top-line growth remains robust

2Q23 preview: Revenue of W618.3bn (+21% YoY) and OP of W68.7bn (+11% YoY)

For 2Q23, we expect HYBE to post revenue of W618.3bn (+21% YoY) and operating profit of W68.7bn (+11% YoY). We see revenue beating the consensus (W543.1bn) on the back of strong album sales by artists like Seventeen, BTS’s Suga, and Le Sserafim. However, we expect margins to be somewhat disappointing, given: 1) one-off expenses related to the BTS Festa event and the Weverse Con Festival; and 2) a weaker-than-expected debut by Boynextdoor.

Reaffirm Buy and TP of W345,000

Although 2Q23 margins are likely to disappoint, we expect the company to deliver robust earnings in 3Q23, supported by the release of digital singles by NewJeans, TXT, and BTS’s Jungkook in July. We also expect Weverse paid services and the debut of a North American girl group to provide positive momentum in 2H23. As such, we reaffirm our Buy call and target price of W345,000 on HYBE.