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K-Pop stocks have rallied by $5.4 bn on the back of strong quarterly earnings in the industry and a surge in the pop culture’s global popularity this year. The strong performance in 2023 has meant that K-Pop stocks have now outpaced the stock returns from other significant international record labels like Universal Music Group NV and Warner Music Group Corp.
The four largest K-Pop companies in South Korea saw their share prices increase by at least 33% this year, outperforming South Korea’s benchmark KOSPI in the process. Among these companies, shares of YG Entertainment rose by more than 100% in 2023. The stocks of JYP Entertainment and SM Entertainment increased by 90% and 33%, respectively.
Currently, Goldman Sachs has maintained its buy recommendation for JYP stocks and has increased its price target for the company from 97,000 won ($74.36) to 130,000 won ($99.65). The institutional asset management company Sanford C Bernstein made HYBE Corporation its top stock pick among all K-Pop stocks. HYBE has the highest market capitalisation of all K-Pop companies in South Korea.
In 2023, HYBE saw its shares rise by more than 50% despite the company failing to take over its rival SM Entertainment. Looking forward, HYBE intends to make its presence felt not only in South Korea but all around the world.
“Although we are mostly focused on K-pop artists at the moment…three to five years from now, as we start expanding into the global markets, including the US, Europe and Japan, we will definitely have established greater balance in terms of our geographical coverage,” HYBE’s CFO, Kyung-Jun Lee, told investors during an earnings call on May 2.
K-pop stocks benefit from robust quarterly earnings
South Korea’s four largest K-Pop companies exhibited strong quarterly earnings between January and March of 2023.
HYBE Corporation saw its revenues in the first three months of 2023 increase by 44.1% to 410.64 bn won ($314.72 mn). In addition, despite their most popular band BTS taking a break from performing, the company saw its album sales climb by almost three times in the first quarter of 2023 (January to March). Furthermore, the operating profit margin of the company for the first quarter was 12.8% or roughly the same as last year.
JYP Entertainment’s revenue grew by 74.1% year on year to 118 bn won ($90.43 mn) during the same period. And its gross profit improved by 92.1%. The company’s net income also rose by 155.1% year on year to 42.7 bn won ($32.72 mn), while its album sales increased by 66%.
Meanwhile, competitor SM Entertainment saw a 20.3% year-on-year rise in its revenues to 203.9 bn won ($156.27 mn). The company, which has the second highest market capitalisation among all South Korean K-Pop companies, saw its gross profits rise by 4.9% year on year to 72.2 bn won ($55.33 mn). Also, its concert revenue grew by a factor of 26 from last year to 19.2 bn won ($14.71 mn).
Also South Korean K-Pop giant YG Entertainment witnessed a whopping 108.6% year-on-year increase in its quarterly revenues to 157.5 bn won ($120.68 mn) in 2023. YG’s net profit also increased by 437.5% year on year to 31.3 bn won ($23.98 mn).
Currently, the K-Pop industry brings in an estimated $10 bn for South Korea’s economy each year.
“The K-Pop sector will record solid market growth trajectory at a compound annual growth rate of 12% in 2022-28 through a stronger presence in global market and monetization efforts of the K-pop producers,” estimates Sanford Bernstein.
Meanwhile, the positive outlook for the industry has also brought a first thematic ETF to the global stage. CT Investments, a subsidiary of South Korea’s Contents Technologies, a content IP company builder, has launched the KPOP and Korean Entertainment ETF, offering exposure to the Korea Exchange-listed companies that may potentially benefit from the growth of the K-pop industry. The ETF launched at NYSE in August 2022.
