Illustration = ChatGPT DALL-E

Samyang Foods' stock price has surpassed 1 million won, rising to the title of 'king stock,' drawing attention to the recent stock price trends of LG H&H and NCSOFT, which once held the same title. These stocks have long since returned the crown due to poor performance and weakening growth momentum. Most shareholders are currently in the loss zone due to the continued decline in stock prices.

LG H&H, which held the title of 'king stock' for about five years until early 2022, has been in decline since its stock price peaked in 2021. At that time, LG H&H's stock price soared to over 1 million won, buoyed by growth in its Chinese cosmetics business, but its excessive reliance on China has become a hindrance.

Starting in 2022, the combination of China's economic slowdown and sluggish duty-free sales has led to deteriorating performance. Operating profit, which reached 1.2896 trillion won in 2021, fell to 486.9 billion won in 2023, about one-third of its previous level, and was only 459 billion won last year.

The stock price has dropped steeply, rendering the glory of being a 'king stock' meaningless. LG H&H, which rose to 1.78 million won in 2021, is currently trading around 310,000 won. According to NH Investment & Securities' Namoo app, 97.52% of LG H&H investors have incurred losses, with an average return of minus (-) 49.1%.

NCSOFT, once referred to as the 'game king stock,' has seen its stock price plummet by more than 80% from its past peak as new game releases have failed. In February 2021, NCSOFT's stock price hit 1,048,000 won, reaching 'king stock' status. At that time, it secured stable cash flows based on its flagship intellectual properties (IP) such as the 'Lineage' series, and the excitement for expanding into mobile and overseas markets contributed to the sharp rise in stock price.

However, as interest in the 'Lineage' series waned, the performance of new games released after 2021 failed to meet expectations, leading to a sharp decline in performance. Operating profit of 559 billion won in 2022 dropped to 137.2 billion won in 2023, a reduction to one-fourth in just one year. Last year, it recorded an operating loss of 109.2 billion won for the first time since its establishment, marking a shift to a deficit.

The stock price has now fallen to the 150,000 won level, reducing it to one-seventh of its peak. According to NH Investment & Securities' Namoo app, 97.76% of investors have incurred losses, with an average return also standing at minus (-) 58.86%.

Graphic = Son Min-kyun

Ultimately, an improvement in performance is likely necessary for the stock prices of both companies to rebound. Experts evaluate that LG H&H needs to expand exports in markets outside China, while NCSOFT's success with the upcoming 'Aion 2' release in the second half of the year will be crucial.

Recently, LG H&H has been focusing on the U.S. and Japan as core export markets. Lee Ga-young, an analyst at Samsung Securities, noted, 'The profitability management focused on China, duty-free, and traditional domestic channels is expected to continue growing at or below market levels in the future. Since the revenue contribution from these channels remains significant, how quickly the U.S. and Japan markets, which the company has pivoted toward, contribute to sales and profits will dictate the direction.'

In the first quarter of this year, LG H&H's overseas sales amounted to 536 billion won, with sales from China reaching 204.6 billion won, accounting for nearly 40%. Given the high reliance on exports to China, the recovery of consumer demand in China in the second half of the year is also regarded as a major variable.

Lee Ji-won, an analyst at Heungkuk Securities, commented, 'While the downward trend of sales has stabilized, we have also escaped the high fixed cost structure from last year's restructuring. If we can secure upside in sales through new releases, we could see significant leverage effects on operating profit.'

Regarding NCSOFT, there are assessments that it needs to prove the success of its new releases, beyond just expectations. Lee Ji-eun, an analyst at Daishin Securities, advised a conservative approach, stating, 'To achieve sustained upward movement in stock price, demonstrating the success of new releases is more important than mere expectations.'

Nam Hyo-ji, a research analyst at SK Securities, noted, 'With the downward trend in sales stabilizing, we have also shed the previously high fixed cost structure through last year's restructuring. If we can secure upside in sales through new releases, operating profit could see a significant leverage effect.'

However, there is a dominant opinion that NCSOFT's recently announced projected sales of 2 trillion won for next year are still an overly ambitious target. Lee Ji-eun commented, 'I consider it an unrealistic target, and the expectations for new releases in the fourth quarter may temporarily reflect in the stock price, but a valuation based on the performance of new releases for next year is at a burdensome level.'