Hybe's earnings inflection is beginning, with BTS's return and global tours bringing a brighter quarterly outlook

Overview

This report is Bernstein's company research and earnings review on Hybe Co Ltd. The core view is that Hybe's share price has returned to a relatively attractive entry point, while BTS's return, increased global touring activity, merchandise, and digital content monetization will drive a stronger revenue and margin trajectory in 2026. The report emphasizes that the market has already recognized the 2026 revenue outlook, but the key debate is whether Hybe can sustainably achieve a double-digit operating margin; Bernstein believes this earnings inflection is beginning.

Core views

The report maintains an Outperform rating and a KRW 400,000 target price. Its main views are: first, Hybe's share price has historically been more correlated with operating margin trends than with revenue growth, making improved operating leverage key to a valuation re-rating; second, BTS's global tours will contribute not only ticketing revenue but also higher-margin revenue from merchandise, VIP packages, memberships, and digital content; third, Hybe's IP portfolio is no longer solely a BTS story, as new IP and mid-sized successes are expanding its earnings base; fourth, if a new BTS album in 2027 becomes a reality, it could further extend the earnings cycle and serve as a positive catalyst.

Analysis framework

The report supports its investment conclusion through earnings forecasts, segment revenue and gross-margin structure, concert unit economics, changes in K-pop global touring shares, peer valuation comparisons, and DCF valuation. The analytical focus shifts from revenue growth to margins and operating leverage, particularly the impact of the concert ticketing and merchandise mix on overall gross and operating margins.

Methodology notes

• Valuation methodologyDCF

  Discounted cash flow valuation

  The report uses a DCF methodology to derive a KRW 400,000 target price for Hybe, assuming a WACC of 10.1%, a perpetual growth rate of 3%, a risk-free rate of 3.4%, a market risk premium of 15.3%, and a beta of 0.5.

• Relative valuationValuation multiple comparison

  P/E, EV/EBITDA, and EV/Sales comparison

  The report presents a valuation summary of Asian internet companies under coverage, showing Hybe's 2026E and 2027E adjusted P/E at approximately 21.1x, and EV/EBITDA at approximately 14.9x and 13.1x, respectively.

• Operating analysisConcert unit economics model

  Profit pool from ticketing and merchandise mix

  Using high-level assumptions and rough internal estimates, the report explains that Hybe's share paid to local promoters for global tours is relatively low, with concert ticketing gross margin of approximately 25% and merchandise gross margin of approximately 50%; combining the two can improve the overall gross margin.

Asset mapping & comparison

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

• Hybe Co Ltd (352820.KS)

  Core covered asset

  Strengths

  BTS continues to have world-class monetization capabilities, global tour scale is leading, its share of K-pop concert revenue is high, its IP portfolio is diversifying, and the concert-plus-merchandise model helps enhance the profit pool.

  Weaknesses

  Concert ticketing has a relatively low gross margin, earnings elasticity remains highly dependent on execution by core IP, and overseas subsidiary investments may weigh on margins.

  Comparison

  The report estimates that Hybe accounts for approximately 70% of K-pop concert revenue, significantly larger than peers; its share paid to local promoters for global tours is approximately 10%, below the 20% to over 30% level of other labels.

  Risks

  Revenue from BTS's return falling below expectations, margin contraction due to higher royalty rates for key IP, and overseas subsidiary investment exceeding expectations.

Key data

• RatingOutperformBernstein maintains a positive rating on Hybe.
• Target price400,000 KRWBased on the DCF valuation methodology.
• Current price215,000 KRWClosing date was July 6, 2026.
• Implied upside86%Calculated from the target price relative to the current price.
• Second-quarter 2026 revenue forecastApproximately KRW 1.2 trillionThe report expects BTS's return and global tours to drive a surge in quarterly revenue.
• Second-quarter 2026 gross-margin forecastApproximately 36%A higher concert revenue mix will dilute the gross margin, but high-margin revenue such as merchandise can provide an offset.
• Second-quarter 2026 operating-margin forecastApproximately 13%Operating leverage is released as revenue scale expands.
• 2026E adjusted EPS10,207 KRWRaised by approximately 2% from the previous forecast of 10,055 KRW.
• 2027E adjusted EPS10,212 KRWThe previous forecast was 10,175 KRW.
• Hybe's share of K-pop concert revenueApproximately 70%The report believes Hybe is significantly ahead of peers in scale.

Impact & implications

The report implies that the core of Hybe's investment thesis is shifting from simply waiting for BTS's return to validating more sustainable margin expansion. If BTS's tours, merchandise, memberships, and digital content form effective synergies, Hybe may demonstrate that a double-digit operating margin is not a one-off peak, supporting an upward valuation revision. At the same time, new IP expansion and the success of mid-sized projects can reduce reliance on a single IP, although BTS remains the key variable determining earnings elasticity and market sentiment.

Risks

• Revenue from BTS's return and global tours falling below expectations.
• Royalty rates or partnership terms for key IP worsening, resulting in margin contraction.
• Overseas subsidiary investment exceeding expectations, weighing on earnings and cash flow.
• Changes in concert ticket prices, venue mix, production costs, taxes, foreign exchange rates, and partner terms may cause the unit economics model to deviate from estimates.
• If expectations for a new BTS album in 2027 are not met, market confidence in earnings continuity may be affected.

What to watch

• The number of BTS global tour dates, attendance rates, ticket prices, merchandise sales, and VIP package conversion.
• Whether actual second-quarter 2026 revenue, gross margin, and operating margin are close to the report's forecasts of approximately KRW 1.2 trillion, 36%, and 13%, respectively.
• The sustained success rate of Hybe's new IP and mid-sized projects, and whether they continue to expand the non-BTS earnings base.
• Signals and announcements related to a new BTS album in 2027.
• The pace of overseas subsidiary investment and its impact on margins and cash flow.