Gaming - Korea: Selective recovery beyond the launch cycle

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Gaming - Korea: Selective recovery beyond the launch cycle

Industry outlook

We expect the aggregate revenue of our Korean gaming coverage to recover from

2026E onward, but the recovery profile remains uneven across companies. We believe it

is appropriate to focus on company-specific earnings visibility rather than a broad-based

sector recovery, as OP growth, margin quality and pipeline execution differ significantly

by name.

Krafton remains our top pick, supported by a 16% 2025A-28E OP 3Y CAGR, the PUBG

franchise’s durability and additional pipeline. Netmarble is our other preferred name, as

recurring revenue from social casino titles provides a stable earnings base, while its

diversified pipeline supports further EPS recovery. By contrast, NC, PearlAbyss and

Kakao Games still require clear evidence of user retention, launch execution and margin

sustainability.

Exhibit 3: Krafton leads 2027E revenue scale with Netmarble offering a Exhibit 4: OP contribution remains strongest at Krafton

stable base 2026E vs 2027E Korea gaming OP

2026E vs 2027E Korea gaming revenue

W1.6tn Krafton Netmarble NC Pearl Abyss Kakao Games

W6tn Krafton Netmarble NC Pearl Abyss Kakao Games

W1.2tn

W5tn

W0.8tn

W3tn 1.2 1.3

4.7 4.8

W0.4tn

W2tn 2.9 3.0 0.5 2.3 2.3 0.3 0.3 0.4 0.3 0.0 0.2 0.0

0.9 0.7 W0.0tn W0tn 0.5 0.5 2026E 2027E

2026E 2027E

Source: BofA Global research estimates

Source: BofA Global research estimates BofA GLOBAL RESEARCH

BofA GLOBAL RESEARCH

Exhibit 5: Profitability recovery varies by execution risk Exhibit 6: ROE improvement broadly expected in 2027E

2026E vs 2027E Korea gaming OPM 2026E vs 2027E Korea gaming ROE

50%

Krafton Netmarble NC Pearl Abyss Kakao Games Krafton Netmarble NC Pearl Abyss Kakao Games

60%

40%

30% 40%

54% 20% 35%

20%

34%

27% 26% 10%