OTT Partnerships And New Titles Will Expand Global Reach

Key Takeaways

• Strategic global expansion, strong international partnerships, and diverse content pipelines position Studio Dragon for sustained revenue growth and greater market influence.
  
• Investments in production efficiency and technology adoption are expected to improve profitability, scalability, and margins amid rising industry production budgets.
  
• Fewer new productions, mounting costs, and dependence on hit dramas heighten revenue volatility and financial risk amid regulatory uncertainty and project-related legal challenges.

Catalysts

A drama studio, produces and provides drama contents worldwide.

• Studio Dragon is expanding its global reach through successful local adaptations (e.g., Marry My Husband: Japan on Amazon Prime Video) and growing presence in major international markets like Japan, with further diversification into new platforms and potential for content sales and co-productions, including anticipation of the China market reopening. Impact: Increases export revenue and recurring international sales.
  
• The company continues to strengthen strategic alliances with leading global OTT providers (Netflix, Amazon, Apple TV+) and is advancing partnerships with new platforms (e.g., collaborative production for Apple TV+), which provides more stable, recurring revenue streams and enhances bargaining power for content licensing. Impact: Boosts revenue visibility, margin stability, and operating leverage.
  
• A robust pipeline with 14 new titles scheduled for release in the second half of the year, along with plans to diversify beyond the current drama business (e.g., new actor partnerships and ancillary businesses), indicates a focus on franchise building, original IP expansion, and monetization in ancillary markets. Impact: Drives long-term revenue growth and margin expansion.
  
• Studio Dragon is leveraging the accelerating global demand for high-quality Korean content, as demonstrated by the international success of premium titles and increasing international recognition, which should be further amplified by continuous investment in content competitiveness and scalable production capabilities. Impact: Supports sustained top-line growth and earnings improvement.
  
• Advancements in production scale, technology adoption, and vertical integration are expected to reduce per-project costs and improve production efficiency, positioning the company to benefit from rising production budgets in the industry while protecting and expanding net margins. Impact: Enhances profitability and scalability of earnings.

Studio Dragon Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Studio Dragon's revenue will grow by 22.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from 0.8% today to 8.2% in 3 years time.
• Analysts expect earnings to reach ₩69.5 billion (and earnings per share of ₩2029.35) by about August 2028, up from ₩3.8 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting ₩98.8 billion in earnings, and the most bearish expecting ₩35.2 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 31.2x on those 2028 earnings, down from 360.7x today. This future PE is greater than the current PE for the KR Entertainment industry at 19.6x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.15%, as per the Simply Wall St company report.

Studio Dragon Future Earnings Per Share Growth

Risks

• The total number of episodes aired by Studio Dragon in Q2 2025 was the lowest ever recorded (41 episodes), leading to a significant decline in programming and licensing revenue; if this trend of fewer new productions continues, it could cause long-term pressure on revenue and earnings.
  
• Studio Dragon posted an operating loss of ₩2.9 billion in the quarter, with profitability further worsened by lingering amortization costs from prior major productions; rising production costs without proportional revenue growth may erode net margins and impair future financial stability.
  
• Continued reliance on a handful of high-profile hit dramas-such as the "Marry My Husband" Japanese remake-exposes Studio Dragon to volatility in revenue and earnings; underperformance or failure to replicate past successes could result in earnings instability and hamper diversification of revenue streams.
  
• Geopolitical uncertainty, such as the ongoing ban on Korean content in China, restricts Studio Dragon's access to a significant market; while there is some optimism around a possible easing, any adverse regulatory developments or re-imposition of restrictions could constrain revenue growth and international expansion.
  
• Delays and legal uncertainties regarding large-scale projects (e.g., the K Culture Valley project with claims and potential damage compensations of up to ₩34.4 billion) represent significant financial risk, potentially leading to increased liabilities and cash outflows, which could negatively impact net margins and earnings.

Valuation

• The analysts have a consensus price target of ₩55533.333 for Studio Dragon based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₩71000.0, and the most bearish reporting a price target of just ₩30000.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₩851.4 billion, earnings will come to ₩69.5 billion, and it would be trading on a PE ratio of 31.2x, assuming you use a discount rate of 9.1%.
  
• Given the current share price of ₩45600.0, the analyst price target of ₩55533.33 is 17.9% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.