KOSDAQMedia & Entertainment041510

SM Entertainment

₩78,700▲ 1.29%2026-10-02 close

Market Cap

₩1.8T

Turnover

₩12.4B

Volume

160,000 shares

Shares out.

22.9M

PER

13.7×

PBR

1.8×

EPS

₩5,751

Dividend Yield

2.05%

PER, EPS, PBR and BPS are calculated in-house from the last 4 quarters (2025Q3–2026Q2) · Dividend yield is based on ₩1,620 per share · Prices as of the 2026-10-02 close

Report overview

Concerts and Merchandise Pull, Albums Push Back

SM Entertainment topped 1 trillion won in 2025 revenue and restored an operating margin in the mid-teens; in 2026 the key question is whether concerts, merchandise and appearance fees can keep offsetting slowing album sales.

1
In 2025 consolidated revenue reached 1,174.9 billion won and operating profit 183.0 billion won, lifting the operating margin to 15.6% from 8.8% in 2024 and 11.8% in 2023.
2
Second-quarter 2026 consolidated revenue of 349.6 billion won was the largest in the disclosed quarterly set, with operating profit of 52.9 billion won keeping the margin in the mid-teens.
3
According to the company, second-quarter separate-basis revenue from appearances, concerts and merchandise/licensing each grew more than 20%, while album and music-streaming revenue declined.
4
A China joint venture, STE, set up with Tencent Music Entertainment widens the greater China channel, though the debut of its new local group is targeted two to three years out.
5
Assessments that its North American traction lags peers, combined with a sector-wide de-rating, have coincided with a downward trend in brokerage target prices.

Business structure

Founded in 1995 and listed on KOSDAQ in 2000, SM Entertainment plans and produces music content while also running artist management, concerts, merchandise, IP licensing and advertising/video businesses. The company says it is expanding artist IP through a multi-production structure under its 'SM 3.0' framework.

According to FnGuide's breakdown on a first-quarter 2026 basis, the entertainment division accounts for 94.6% of revenue, within which concerts and video content represent 63.5%, albums and music streaming 20.1%, and management 11.0%.

The roster spans veteran IP such as TVXQ, SUPER JUNIOR, Girls' Generation and EXO alongside younger acts including the NCT units, aespa, RIIZE, NCT WISH and Hearts2Hearts, giving generational diversification.

Key consolidated subsidiaries include Dream Maker, which produces concerts, and Dear U, which runs a fan platform; the company attributed part of second-quarter performance to Dream Maker's expanded concert production and Dear U's margin improvement from subscription price increases and a shift to web payments.

Revenue is generated across Korea and overseas markets including Japan, China, Southeast Asia and the United States, with the Japanese entity and local concert/merchandise distribution forming the core of overseas sales.

The company said touring by veteran artists and increased advertising and event activity by its artists are steadily diversifying its revenue mix. Competition is a four-way contest with HYBE, JYP Entertainment and YG Entertainment across albums, tours, merchandise and fan platforms.

Of total equity of 1,358.7 billion won at end-2025, 356.1 billion won was non-controlling interest, meaning outside shareholders retain sizable stakes in consolidated units and a structural gap persists between consolidated and owners' earnings.

Earnings trend

Quarterly revenue · Operating profit

₩302.9B₩47.6B25Q2₩321.6B₩48.2B25Q3₩319B₩54.6B25Q4₩279.1B₩38.6B26Q1₩349.6B₩52.9B26Q2

RevenueOperating profit

Annual revenue · Operating profit

₩850.8B₩91B2022₩961.1B₩113.5B2023₩989.7B₩87.3B2024₩1.2T₩183B2025

RevenueOperating profit

Quarterly results · Last 5 quarters
Quarter	Revenue	Operating profit	Op. margin
2025Q2	₩302.9B	₩47.6B	15.7%
2025Q3	₩321.6B	₩48.2B	15.0%
2025Q4	₩319B	₩54.6B	17.1%
2026Q1	₩279.1B	₩38.6B	13.8%
2026Q2	₩349.6B	₩52.9B	15.1%

Annual results
Year	Revenue	Operating profit	Net income (parent)	Op. margin	ROE	Debt-to-equity
2022	₩850.8B	₩91B	₩80B	10.7%	11.5%	65.1%
2023	₩961.1B	₩113.5B	₩87.3B	11.8%	12.1%	69.4%
2024	₩989.7B	₩87.3B	₩18.3B	8.8%	2.8%	71.2%
2025	₩1.2T	₩183B	₩347.2B	15.6%	34.6%	47.8%

Consolidated basis (financial statements including subsidiaries) · Final figures from DART filings · Net income attributable to owners of the parent · Data as of 2026-09-04

Earnings analysis

In 2025 consolidated revenue was 1,174.9 billion won and operating profit 183.0 billion won, for an operating margin of 15.6%.

That compares with 989.7 billion won of revenue and 87.3 billion won of operating profit (8.8% margin) in 2024, 961.1 billion won and 113.5 billion won (11.8%) in 2023, and 850.8 billion won and 91.0 billion won (10.7%) in 2022, indicating simultaneous improvement in scale and margin.

Owners' net profit reached 347.2 billion won in 2025 versus 18.3 billion won in 2024; because it far exceeded operating profit, non-operating items such as asset and stake disposals appear to have contributed heavily, so its repeatability warrants caution.

Operating cash flow rose to 194.9 billion won in 2025 from 135.7 billion won in 2024, 113.0 billion won in 2023 and 114.9 billion won in 2022, while the debt-to-equity ratio fell to 47.8% from 71.2%.

On a quarterly basis, revenue and operating profit were 302.9 billion won and 47.6 billion won in the second quarter of 2025, 321.6 billion won and 48.2 billion won in the third, and 319.0 billion won and 54.6 billion won in the fourth, keeping quarterly margins in a 15-17% range.

The first quarter of 2026 saw revenue of 279.1 billion won and operating profit of 38.6 billion won, down sequentially, reflecting seasonality from a gap in comeback schedules.

The second quarter of 2026 delivered revenue of 349.6 billion won and operating profit of 52.9 billion won, the highest revenue in the disclosed set, while owners' net profit of 29.5 billion won was little changed from 29.3 billion won a year earlier. iM Securities tallied second-quarter 2026 separate-basis merchandise and licensing revenue at 77.9 billion won, up 22% year on year, while album and music-streaming revenue fell 8% to 90.9 billion won.

Summing the four quarters from the third quarter of 2025 through the second quarter of 2026 gives revenue of 1,269.3 billion won, operating profit of 194.3 billion won and owners' net profit of 131.7 billion won, showing revenue growth but a bottom line of a different character from the 2025 full-year figure.

Industry analysis

The K-pop album market rebounded in the first half of 2026 after a period of adjustment. Hanteo Chart data put first-half 2026 K-pop album sales at 49.53 million units, above the 46.17 million of first-half 2023 and an all-time high for the period, up about 23.4% from 40.12 million a year earlier.

That rebound followed two years of adjustment, including the first-ever annual decline in 2024 and a drop to roughly 93.5 million units in 2025. Some in the industry note the first-half record reflected a concentration of comebacks by major artists, while album sales at small and mid-sized agencies actually fell.

On the streaming side, usage of Circle Chart's top 400 digital tracks fell 4.3% year on year, pointing to softer digital consumption.

The shift in earnings weight from albums toward concerts, merchandise and IP collaborations is common to all four major agencies, and SM offset its album decline with merchandise and licensing growth in the second quarter.

In a May 2026 report, Kiwoom Securities noted HYBE's multiple had fallen to 25 times while SM traded at 15 times, JYP Entertainment at 16 times and YG Entertainment at 16 times, with major sector names down an average of 39% from their second-half 2025 highs.

Daol Investment & Securities said in a July 2026 report that SM's North American results lag peers while its standing in Asia remains an advantage.

Outlook

Alongside second-quarter results the company disclosed its second-half lineup.

Under the plan, the third quarter features the single debut of Girls' Generation unit Girls' Generation-HRS, a full-length album from NCT 127 and mini albums from Minho and WayV, while the fourth quarter brings full-length albums from Yesung, Taeyeon, Jaehyun and NCT DREAM, mini albums from Changmin, Xiaojun, NCT WISH and an EXO unit, a single from Hearts2Hearts, and a RIIZE comeback.

On the touring side, aespa's new world tour began with two Seoul concerts at Gocheok Sky Dome in August before expanding to North America and Europe, and NCT WISH will run a fan meeting tour across multiple markets.

In an August 2026 note, Eugene Investment & Securities said veteran artists should stay active in the second half but that full-scale global touring by younger acts such as RIIZE and NCT WISH is more likely to materialize next year, with the debut of new boy group SMTR25 scheduled for the fourth quarter.

Channel expansion is under way in greater China.

On August 27, 2026 SM said it had established a joint venture, STE, with Tencent Music Entertainment in Beijing and appointed its chief executive, adding that STE will run a Chinese rookie idol group project targeting a debut within two to three years, including auditions and local management.

STE also plans to take charge of greater China management for NCT DREAM's Renjun and WayV's YangYang and Xiaojun. iM Securities said in an August 2026 report that it was cutting its target price to 120,000 won from 140,000 won, citing a second-half earnings gap and a sector-wide decline in valuations.

Second-half results hinge on the combination of new album sales, tour count and scale, and expansion of merchandise sales channels, while the rookie debut and the China project involve costs upfront and revenue with a lag.

Valuation

PER

13.7×

PBR

1.8×

ROE

13.4%

EPS

₩5,751

BPS

₩45,073

Dividend per share

₩1,620

How multiples read depends heavily on which earnings base is used. Because owners' net profit in 2025 far exceeded operating profit, a multiple based on that year's bottom line and one based on the most recent four quarters of earnings paint different pictures.

In a May 2026 note, Kiwoom Securities cited SM's multiple at about 15 times, alongside HYBE at 25 times, JYP Entertainment at 16 times and YG Entertainment at 16 times — that is, below the sector bellwether and broadly in line with its two closest peers.

Against book value, the shares trade above net asset value per share, implying weight is placed on the durability of IP-driven earnings rather than on asset value.

The company has paid a cash dividend each year, but the yield is not far above the market average, so earnings growth and subsidiary contribution, rather than shareholder returns, sit at the center of the valuation debate.

For reference, Daol Investment & Securities said in a July 2026 report that it was lowering its fair value to 110,000 won from 130,000 won, reflecting higher second-half cost assumptions and a decline in sector multiples.

These are brokerage views relayed as fact, and the multiple discussion ahead may shift with new album sales, tour scale and confirmation of subsidiary earnings contribution.

PER, EPS, PBR and BPS are all calculated in-house (the same method as Naver and Toss) · Dividend yield = cash dividend per share from DART filings (supplemented by KRX) ÷ current price · As of 2026-09-04

Bull factors

A mix less dependent on albums

The company said second-quarter 2026 separate-basis revenue rose 9.2% year on year, with appearance revenue up 27.9%, concert revenue up 23.6% and merchandise and licensing up 22.0%.

That is why consolidated revenue reached 349.6 billion won, the highest in the disclosed quarterly set, even as album and streaming sales fell. iM Securities tallied merchandise and licensing above 70 billion won for a second consecutive quarter, helped by more concert- and album-linked pop-ups and online merchandise sales from the NCT WISH character pop-up. The broader the spending paths per fan, the less earnings need hinge on a single comeback schedule.

Improved earnings power and balance sheet

The 2025 operating margin of 15.6% exceeded 8.8% in 2024, 11.8% in 2023 and 10.7% in 2022, and the first and second quarters of 2026 held margins in the mid-teens and low-to-mid teens respectively. Operating cash flow rose steadily to 194.9 billion won in 2025 from 114.9 billion won in 2022.

The debt-to-equity ratio fell to 47.8% in 2025 from 71.2% in 2024, widening financial headroom. Simultaneous improvement in margin and cash generation is linked to the capacity for upfront investment in rookie debuts and overseas expansion.

Greater China channel and rookie pipeline

On August 27, 2026 SM said it had set up a joint venture, STE, in Beijing with Tencent Music Entertainment, China's largest music platform company, to begin developing local rookie idols and running artist management. iM Securities referred to expectations for expanded China business in an August 2026 report.

Eugene Investment & Securities noted that new boy group SMTR25 is slated to debut in the fourth quarter after building recognition through pre-debut fan meeting tours. Staggering IP across generations can work to reduce annual earnings volatility.

Bear factors

Slowing album and streaming revenue

According to iM Securities' tally, second-quarter 2026 separate-basis album and streaming revenue fell 8% year on year to 90.9 billion won. Market commentary flagged the decline in album and streaming revenue on lower new-release sales as a drag.

Albums carry a large margin contribution, so a persistent volume slowdown could offset much of the growth from concerts and merchandise. Usage of Circle Chart's top 400 digital tracks fell 4.3% year on year, another sign of softness in mainstream consumption.

Relatively weak North American momentum

Daol Investment & Securities said in a July 2026 report that SM's North American results lag peers.

Eugene Investment & Securities projected that full-scale global touring by younger acts such as RIIZE and NCT WISH would become visible next year rather than this year. aespa's tour weighted toward Western markets is under way, but confirming results will take time. Without follow-through in Western metrics, questions about the Asia-heavy structure may persist.

One-off gains and subsidiary variables

Owners' net profit of 347.2 billion won in 2025 far exceeded that year's operating profit of 183.0 billion won, suggesting a substantial non-recurring component.

Indeed, owners' net profit of 29.5 billion won in the second quarter of 2026 was little changed from 29.3 billion won a year earlier, so bottom-line growth did not keep pace with revenue growth.

Mirae Asset Securities said in a November 2025 report that it had trimmed its estimates conservatively to account for slower-than-expected growth at some key subsidiaries. With non-controlling interests exceeding a quarter of total equity, a gap remains between consolidated and owners' earnings.

Risk factors

Artist and IP concentration risk

Revenue depends on the comeback and tour schedules of a handful of core IPs, so contract expirations, activity halts or personal issues feed straight into results and fan spending. Industry commentary notes that as the sector grows, artist misconduct and an agency's crisis response have become investment criteria.

As the sequential revenue decline in the first quarter of 2026 showed, a comeback gap alone widens quarterly swings. Multi-production and generational spread mitigate but do not eliminate this risk.

China and overseas policy and demand variables

The Chinese rookie group under the Tencent Music joint venture STE is an early-stage project targeting a debut within two to three years. Greater China operations are exposed to local content regulation and shifts in Korea-China relations, so timelines and revenue recognition can move.

Producers at smaller labels cited falling overseas volumes in Southeast Asia and China, a K-pop boycott movement in parts of Southeast Asia earlier in the year, and high merchandise and ticket prices as demand headwinds. With a large overseas revenue share, currency moves and regional sentiment also flow into results.

Sector multiple swings and upfront costs

Kiwoom Securities noted in a May 2026 report that major entertainment names were down an average of 39% from their second-half 2025 highs, reflecting sector-wide sentiment deterioration beyond company-specific issues.

Daol Investment & Securities said in July 2026 that it had raised second-half cost assumptions and slightly cut its 2026 estimates. Rookie debuts and joint-venture formation recognize costs before revenue, which can weigh on near-term margins. Even with solid results, market assessment can shift with sector multiples, a separate variable.

What to watch next

September-October 2026
A window to check first-week sales of NCT 127's seventh full-length album released for their 10th debut anniversary and progress on the Asia tour, plus results for the Girls' Generation-HRS single. The key issue is whether third-quarter album volume can reverse the second-quarter decline in album revenue.
Early November 2026
Third-quarter results are due. The company has typically disclosed its next-quarter lineup alongside earnings, so this is an opportunity to check whether the quarterly operating margin holds near 15% and whether merchandise and licensing revenue sustains its recent run rate.
Fourth quarter 2026
A period concentrated with the debut of new boy group SMTR25 and comebacks from Taeyeon, NCT DREAM and RIIZE. Worth watching are initial sales and fan meeting results, and how the associated upfront costs flow into fourth-quarter margins.
Second half 2026 to first half 2027
Execution of the North American and European legs of aespa's world tour serves as a gauge of Western fanbase expansion. The point to watch is whether per-show attendance and concert merchandise revenue rise together.
Around February 2027
Full-year 2026 results and a dividend decision are expected to be disclosed. This allows a check on the annual trend in core operating earnings excluding the non-operating items embedded in 2025 net profit, and on any change to shareholder return policy.

Overall view

SM Entertainment posted 2025 consolidated revenue of 1,174.9 billion won and operating profit of 183.0 billion won for a 15.6% operating margin, restoring profitability from 8.8% in 2024, while its debt-to-equity ratio fell from 71.2% to 47.8%.

Into 2026, second-quarter revenue of 349.6 billion won and operating profit of 52.9 billion won extended top-line growth, but owners' net profit was little changed year on year, so bottom-line improvement trailed revenue growth. The composition of growth has shifted.

As the company disclosed, appearances, concerts and merchandise/licensing grew at double-digit rates while albums and streaming declined, leaving diversified fan spending paths to carry results.

At the industry level, first-half 2026 album sales hit a record, yet concentration toward major agencies and falling digital usage appeared at the same time, keeping debate alive over the quality of that growth.

The STE joint venture with Tencent Music and the fourth-quarter rookie debut are medium-term pipeline items that recognize costs before revenue, and assessments that North American traction lags peers remain.

Ultimately four checkpoints - second-half new album sales, Western results from aespa's world tour, continued strong growth in merchandise and licensing, and subsidiary earnings contribution - will define the bull and bear cases. This material is for informational purposes only and contains no buy or sell opinion or target price.

Sources

Korea Exchange (KRX) — Prices · Market Cap · Volume
FSS electronic disclosure system (DART) — Financial statements · Dividend filings

Show 18 more articles and sources

Report written 2026-09-05 · Data as of 2026-09-04

This content is AI analysis of market data and web search results, provided for information only. It is not a solicitation or recommendation to invest. Investment decisions and their consequences are the investor's own responsibility. Data may be delayed or contain errors.