NCsoft: Return of the Original P2E Game Creator

The authors are analysts from Shinhan Investment Corp. They can be contacted at and, respectively. – Ed.

3Q21 PO misses consensus at KRW96.3 billion (-14.7% QoQ)

NCsoft posted operating profit of KRW96.3 billion (-14.7% QoT) on sales of KRW500.6bn (-7.0% QoQ) for 3Q21, below the consensus estimate of KRW127. 1bn. Average daily sales increased from KRW 160 million in QoQ to KRW 1.63 billion for Lineage M, but fell from KRW 680 million in QoQ to KRW 1.72 billion for Lineage II M. Blade sales & Soul 2 were also slow at KRW 22.9 billion.

Lineage W sales remain high thanks to high traffic

Lineage W sales averaged KRW 12 billion per day in the first week of its launch and will likely exceed KRW 100 billion in cumulative terms on day 9, the fastest pace in the world. history of the company. MMORPGs tend to have strong sales during the initial launch phase, but are only followed by a rapid drop in user numbers and sales. However, Lineage W maintains a heavy traffic flow, registering the highest number of concurrent users on November 10, the seventh day after its release. We expect Lineage W’s daily average sales to reach KRW 6.2 billion in 4Q21 and remain strong at KRW 4 billion in 2022 with gaming served in the second region. A drop in sales is inevitable for previous Lineage titles, with national daily average sales of Lineage M estimated at KRW 1 billion and Lineage II M at KRW 0.6 billion for 2022.

Rising expectations for global success in adopting NFT / P2E

NCsoft has made it clear that it will adopt a P2E (play-to-earn) model using NFT (non-fungible tokens). Lineage’s next IP-based game (Project TL) will likely offer P2E functionality. Until recently, it was considered very difficult to be successful in overseas MMO markets due to the high barriers to entry. However, Wemade’s success with Mir 4 Global has raised expectations for P2E MMOs.

The success of P2E NFT games relies on efficient management and operation of the game saving system. NCsoft has a proven ability to properly manage in-game currency as well as item supply (scarcity) or over-inflation. years of Lineage operations.

Price target raised from 32.1% to KRW1,030,000

Our target price for NCsoft is increased 32.1% to KRW1,030,000 with the revised target PER from 20x to 25x on increased expectations of global MMO success with the adoption of the NFT / P2E model. NCsoft is expected to take a leap forward as a global player when it launches P2E games in 2022.

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