SM Entertainment: 2Q26 in-line; not many catalysts for 3Q26

Research evidence excerpt

M

Update

August 5, 2026 08:52 AM GMT

Morgan Stanley & Co. International plc, Seoul Branch+

SM Entertainment | Asia Pacific

Jenna Lee

Equity Analyst

2Q26 in-line; not many catalysts

for 3Q26

AlphaSignals Earnings Reaction

SM Entertainment (041510.KQ, 041510 KS)

Unchanged

In-line

Largely unchanged

Impact to our thesis

Financial results versus consensus

Direction of next 12-month

consensus EPS

S. Korea Media | S. Korea

Stock Rating

Industry View

Price target

Shr price, close (Aug 4, 2026)

52-Week Range

Sh out, dil, curr (mn)

Mkt cap, curr (bn)

EV, curr (bn)

Avg daily trading value (bn)

Source: Company data, Morgan Stanley Research

Key Takeaways

SM posted 2Q26 OP of W53bn (up 1% YoY, up 15% QoQ), in-line with our

estimates and consensus.

Equal-weight

In-Line

W80,000

W76,700

W155,100-63,900

23

W1,799

W1,441

W17

Strong parent MD sales and subsidiary performance led to better-than-expected

top-line results.

But parent GPM was pressured by an unfavorable segment mix (high artist

involvement biz 30% of sales in 2Q26 vs. 26% in 2Q25) and a high legacy IP

contribution.

Consolidated OP improvement was driven by subsidiaries, notably Dream Maker

(concert promotion), but the sustainability of this improvement remains

uncertain.

We expect 3Q26 earnings to decline YoY, given a weaker album and concert

pipeline. Boy band debut should be a key determinant of future share price

performance.

What's next? Key events in 3Q26 will be aespa's world tour in Asia and America

(arena size) and NCT 127's album release. The album and concert pipeline generally

looks weaker YoY, which could lead to an OP decline in 3Q26. The company is

focused on preparations for the boy band debut (SMTR25), planned for 4Q26 or

1Q27. A successful launch of the new group should be a key determinant of future

earnings growth and share price performance.

Exhibit 1:

2Q26 preliminary results

W bn

Total revenue

Parent

-Album

-Streaming

-Appearance

-Concert

-MD/Licensing

Subsidiaries

Gross profit

GPM %

Parent Gross profit

GPM %

SG&A

Operating profit

OPM %

Parent OP

OPM %

Subsidiaries OP

Net profit

2Q25

303

220

72

27

23

34

64

83

115

37.8%

76

34.3%

67

48

15.7%

46

20.8%

2

29

1Q26

279

189

27

31

20

61

47

90

100

36.0%

60

…