[Click eStock] KT 2Q Operating Profit Expected at 400 Billion Won... Up 36.5% YoY

Expectations Rise for Highest Dividends in the Telecommunications Industry

[Asia Economy Reporter Minwoo Lee] KT's operating profit for the second quarter of this year is expected to approach 400 billion KRW, indicating that the phase of profitability expansion will be maintained. Since the performance in the second quarter of last year was somewhat sluggish, the profitability in the second quarter of this year is analyzed to be more strongly highlighted by the base effect.

On the 10th, Yuanta Securities forecasted that KT would achieve sales of 6.0317 trillion KRW and an operating profit of 393.4 billion KRW in the second quarter of this year. Compared to the same period last year, sales decreased by 1.1%, but operating profit increased by 36.5%. Namgon Choi, a researcher at Yuanta Securities, explained, "Following the operating profit of 383.1 billion KRW in the first quarter, the phase of profitability expansion is expected to continue in the second quarter as well," adding, "From a profitability perspective, it is evaluated that KT has overcome the 5G cost shock and has entered a normal phase of profit expansion."

Dividends are also expected to increase. Earlier, KT CEO Koo Hyun-mo announced at a corporate briefing on the 29th of last month that 50% of the adjusted net income on a separate basis would be paid as dividends. He also stated that the dividend would be maintained at least at the level of 1,100 KRW, which was the dividend level last year. The dividend payout ratios based on adjusted net income on a separate basis were estimated to be 39% and 49% in 2018 and 2019, respectively.

Researcher Choi said, "Considering the CEO's determination to control costs and the will for qualitative growth, expectations for net income exceeding the company's target can also be anticipated," adding, "The company's mid-to-long-term financial targets (sales of over 19 trillion KRW and operating profit of over 1 trillion KRW on a separate basis in 2022) are too conservative, so the dividend potential in 2022 can be viewed as high as 1,500 KRW."

Against this background, Yuanta Securities gave KT a buy rating with a target price of 36,000 KRW. The closing price on the previous day was 24,950 KRW.