$GRVY – what to expect 2021?

Summary 2020
- Gravity posted strong results for Q3, with 70% top line growth and more than 200% profit growth
- The success of Next will be reflected in the coming quarters
- Enterprise value (EV/EBIT) for Q3 was around 7 which is 3,7 times...
...lower than similar stocks and gaming-industry in general
- Q4 will probably be a great quarter expected around $140-150m in revenue
- Their latest release (RO2 spear of Odin) is performing really well with great reviews – the game is developed in house which means higher..
margins
- Pipeline is huge in 2021 with several releases (both new markets and new games) – Thailand is a main market going into 2021
- “Ragnarok – Eternal love”, “Ragnarok – Origin” and “Ragnarok – Next generation” is the majority of the revenue in 2020
- Still no debt and HUGE cash on hand around $150m-$170m
- Increasing self-developing which means higher margins
- Still no analyst coverage
- Smashed the game rankings (#1 in HK, Taiwan and Macau)
- Loyal fan base
Release in china?
Since gravity is a South Korean company they cannot just release any game in China without permission. This is a political decision and can be long drown out. In 2021 there were only 3 Korean games approved to be submitted into china in 2020. This is not much...
..but together with Tencent I think there is a fair chance of getting approval in 2021. This will be VERY bullish for a new potential market of 1,4b people. But it’s not something I expect, why SEA, Latin America and the Middle East is the main focus.
Why this setback in December 2020?
After seeing a huge run until 22 December a healthy pullback was needed. People taking profits into tax-season lowered down the stock price end December but nothing is changed. The case is intact and I think we will see $250 again in January.
I believe it’s a great buying opportunity for people who didn’t catch the train at first. We are not done yet.
Future
Personally, I think gravity can grow 5x to 10x its revenue within 2 years in regard to the pipeline and the markets they will enter the next 1-2 years.
This is without China taken into account. In the short term view I cannot see why gravity shouldn’t be 2x the share price of today after Q1 report release 2021. So I expect the SP to be $360 in summer 2021.
Origin will be launched in Japan H1 2021 and XNEXT in SEA H1 2021.
You can follow @kristof05446418.
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