Goldman Sachs Maintains Buy Rating on Krafton but Cuts Target Price to W300,000

Overview

This report updates Goldman Sachs' rating and valuation framework for Krafton. The report maintains a Buy rating but, following a reset in global gaming-company valuation frameworks, reduces Krafton's target P/E multiple from 18x to 13x and cuts the 12-month target price from W500,000 to W300,000. The core view is that PUBG, as a "forever game," continues to offer strong cash flow and monetization resilience, but its high single-IP concentration limits the valuation premium; meanwhile, the early performance of Subnautica 2 and the showcase of five new titles at Gamescom 2026 demonstrate progress toward becoming a multi-asset publisher.

Core views

Goldman Sachs believes Krafton's current share price implies approximately 8.5x 12-month forward EPS, an unusually low single-digit NTM P/E among Asian gaming peers, and therefore already heavily reflects single-IP risk, providing an attractive entry point. The key reason for the valuation discount is not weak PUBG performance; rather, the stronger PUBG performs, the higher the bar for non-PUBG new releases to contribute a sufficient share of profits to reduce concentration. If visibility into non-PUBG revenue, sustained monetization, and multi-year earnings power is established, the valuation could recover from 13x toward 14-15x or higher.

Analysis framework

The report applies a global gaming-peer earnings-quality framework, mapping companies to target P/E ranges based on three core pillars: future pipeline quality and IP diversification, geographic coverage, and near-term earnings visibility. Krafton is placed in the 13x-15x range for companies with high near-term cash-flow visibility but single-IP concentration, with the low end of the range, 13x, applied because recurring profitability outside PUBG has yet to be validated. The earnings forecasts also incorporate early Subnautica 2 sales, PUBG PC/mobile live-service trends, and the impact of Subnautica 2-related earn-outs on non-operating income.

Methodology notes

• Valuation methodsGlobal Gaming Peer Earnings-Quality P/E Framework

  Target P/E ranges segmented by IP diversification, global coverage, and earnings visibility

  Using the 2027E P/E median of 18x for global gaming peers as a benchmark, Goldman Sachs assigns 19x-21x or higher to companies with multi-IP flywheels and global platform coverage, 16x-18x to companies with multiple durable IPs, 13x-15x to companies with a single IP but strong near-term cash flow, and 10x-12x to companies with low profitability or limited visibility into pipeline substitution.

• Valuation methodsNTM P/E Target Price Method

  13x NTM P/E

  Krafton's 12-month target price of W300,000 is derived by applying a 13x target P/E to NTM EPS; the multiple is reduced from the previous 18x to reflect single-IP concentration and the insufficiently validated non-PUBG pipeline.

• Quality FactorGS Factor Profile

  Growth, Financial Returns, Multiple, Integrated

  Goldman Sachs discloses that its Factor Profile provides investment context for stocks through growth, financial returns, valuation multiple, and integrated percentiles, with the integrated metric representing the average of growth, financial returns, and low-valuation characteristics.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Krafton (259960.KS)

  Company covered by the report and investment subject

  Strengths

  Strong global traffic and monetization resilience for PUBG, with solid cash-generation capabilities; better-than-expected early sales of Subnautica 2; five new titles at Gamescom 2026 provide pipeline optionality.

  Weaknesses

  Earnings remain highly dependent on PUBG, while sustained multi-year contributions from non-PUBG titles have yet to be validated; the timing, quality, and revenue visibility of new-title commercialization remain insufficient.

  Comparison

  At approximately 8.5x 12-month forward P/E, Krafton trades at a low single-digit valuation level among Asian gaming peers, but should still trade at a discount to multi-IP durable publishers.

  Risks

  Deteriorating PUBG engagement or monetization, delays or underperformance in new-title commercialization, and failure to escape the single-IP publisher discount.

• PUBG

  Core earnings anchor and valuation constraint

  Strengths

  Stable live-service cadence across PC and mobile, with the Xeno Point update driving higher PCU; Black Market 2026 could strengthen 2Q26 monetization.

  Weaknesses

  The stronger the core IP, the higher the scale threshold required for new IPs to reduce earnings concentration.

  Comparison

  Compared with the new pipeline, PUBG remains the clearest and most verifiable source of cash flow.

  Risks

  Declining player engagement or payment conversion would directly weaken visibility into core earnings.

• Subnautica 2

  Non-PUBG diversification catalyst

  Strengths

  Early-access sales exceeded 4 million copies in five days, with user reviews rated Very Positive, prompting Goldman Sachs to significantly raise its sales and bookings forecasts.

  Weaknesses

  The game remains in early access, and full release may take two to three years; it has yet to demonstrate recurring live-service characteristics comparable to PUBG.

  Comparison

  Compared with other uncommercialized pipeline titles, Subnautica 2 is currently the most visible source of non-PUBG contributions.

  Risks

  If subsequent content updates, the full-release schedule, or long-term retention fall short of expectations, the diversification narrative could weaken.

Key data

• RatingBuyThe report maintains a Buy rating.
• 12-month target priceW300,000The previous target price was W500,000.
• Current priceW204,000Price disclosed on the report's cover page.
• Implied upside47.1%Based on the W300,000 target price and W204,000 current price.
• Target valuation multiple13x NTM P/EThe previous target multiple was 18x.
• 2026E revenue forecastW4,871.7bnThe new forecast is approximately 2% above the previous forecast.
• 2026E EPSW22,545The previous forecast was W27,071.
• 2026E P/E9.0xDisclosed in the report's forecast table.
• First-12-month Subnautica 2 sales forecast7.3mnThe previous forecast was 1.5mn; early-access sales exceeded 4mn in five days.
• First-12-month Subnautica 2 bookings forecastApproximately W330bnThe previous forecast was W90bn.
• PUBG PC daily PCU963kDaily PCU increased 25% following the Xeno Point arcade-mode update.
• 2026E/2027E/2028E revenue revisions+2%/-4%/-4%Reflects Subnautica 2, PUBG live-service trends, and related earn-outs.
• 2026E/2027E/2028E OP revisions+6%/-8%/-10%Revisions to operating profit forecasts disclosed in the report.
• 2026E/2027E/2028E NP revisions-15%/-7%/-9%Revisions to net profit forecasts disclosed in the report.

Impact & implications

The investment implication is that Krafton's valuation reset does not negate the company's fundamentals, but repositions it from expectations of a multi-IP premium to a valuation tier characterized by "strong cash flow, strong single IP, and diversification awaiting validation." Near-term PUBG operations and Subnautica 2 sales can support earnings and sentiment; over the medium term, whether Gamescom 2026 pipeline titles, inZOI, and other new projects can demonstrate sustained commercialization will determine whether the valuation can re-rate from the bottom of the 13x range.

Risks

• PUBG engagement or monetization deteriorates faster than expected, reducing the visibility and durability of the core earnings base.
• Subnautica 2, inZOI, or other new projects face delays, weaker-than-expected product quality, or underwhelming commercialization.
• New IPs fail to generate sustainable contributions, causing the company to continue trading at a structural discount as a single-franchise publisher.
• Insufficient visibility into non-PUBG revenue makes it difficult for the valuation multiple to recover from 13x toward 14-15x or higher.
• The market continues to focus on single-IP concentration, potentially limiting valuation expansion even if near-term earnings growth remains solid.

What to watch

• PUBG PC concurrent users on Steam, PUBG Mobile bookings rankings in key countries, and Peacekeeper monetization and engagement.
• The impact of Black Market 2026 on PUBG PC 2Q26 payment conversion and revenue.
• Subnautica 2 subsequent sales, Steam reviews, content-update cadence, and full-release date.
• Gameplay showcases, viewership, beta schedules, launch windows, and management commentary for the five new titles at Gamescom 2026.
• Whether the contribution of non-PUBG titles to total operating profit increases over time.
• Whether 2026E-2028E revenue, OP, and NP forecasts are revised upward or downward as the pipeline progresses.