[Click eStock] KT, 3Q Operating Profit 324 Billion KRW... 4% Increase YoY Expected

5G Subscriber Net Increase... Media Business Platform Dominance Rises

[Asia Economy Reporter Minwoo Lee] KT is expected to post a slightly improved operating profit in the third quarter of this year compared to the previous year. The growth of the cloud business in the B2B sector is anticipated going forward.

On the 7th, Kiwoom Securities forecast that KT will achieve consolidated sales of 5.921 trillion KRW and an operating profit of 324 billion KRW in the third quarter of this year. Sales are expected to decrease by 5% compared to the same period last year, but operating profit is projected to increase by 4%. The net increase in subscribers is judged to be similar to the previous quarter, but it is analyzed that one-time costs such as wage negotiation increases and broadcasting development funds are expected to be reflected.

Wireless sales are expected to rise by 2% year-on-year to 1.766 trillion KRW. Despite the COVID-19 pandemic, growth has continued centered on 5G subscribers. Media business sales are estimated to increase by 8% year-on-year to 443 billion KRW. The expansion of high-quality subscribers and the increase in platform revenue are expected to be maintained. Additionally, the results of negotiations on home shopping transmission fees are also expected to be reflected.

In the B2B sector, performance growth due to the expansion of 5G-based smart factory and cloud businesses is also considered valid. The non-face-to-face business environment is expected to contribute to cloud demand, making the cloud business favorable. However, due to the impact of COVID-19, it is still considered difficult to expect profitability recovery in the financial and real estate sectors.

Total sales for this year are projected to decrease by 2.7% year-on-year to 23.682 trillion KRW, while operating profit is expected to increase by 3% during the same period to 1.183 trillion KRW. Jang Minjun, a researcher at Kiwoom Securities, explained, "Wireless revenue continues to grow with the net increase of 5G subscribers despite the impact of COVID-19, and in the media business, the environment for platform revenue growth based on the dominant position in the paid broadcasting market, including IPTV, continues. Orders are expected in both the public and private sectors in the B2B segment, and the expansion of business areas that can support platform solutions on top of simple infrastructure provision is an opportunity."

Expectations for premiums on B2B growth and an increase in dividend payout ratio remain valid. As the 5G environment is established, services with diverse demands are required not only for simple mobile devices but also for various other needs. In the paid broadcasting business, market share is expected to grow through mergers and acquisitions via subsidiaries, maintaining market dominance. Researcher Jang said, "An increase in dividend payout ratio is expected over the next three years due to improved performance, and an expansion of shareholder return scale is also anticipated."

Against this background, Kiwoom Securities maintained a 'Buy' investment rating on KT with a target price of 38,000 KRW. The closing price on the previous day was 22,900 KRW.