[Click eStock] "KG Inicis, Second Half Earnings Recovery... Target Price 28,500 Won"

Hana Financial Investment Report

[Asia Economy Reporter Minji Lee] Hana Financial Investment on the 30th issued a buy rating and a target price of 28,500 KRW for KG Inicis. This is based on the expectation of transaction volume growth centered on high-profit merchants this year, which is anticipated to lead to additional value appreciation.

KG Inicis is a leading domestic electronic payment market company competing with NHN Korea Cyber Payment, Toss Payments, and others. However, recently, its corporate value has been continuously discounted due to participation in non-affiliated business acquisitions by the KG Group, such as Yellow Cap and Dongbu Steel, as well as the issue of e-commerce companies like Naver and Coupang internalizing PG functions.

Jaeho Choi, a researcher at Hana Financial Investment, said, “Considering that there is no plan for additional mergers and acquisitions unrelated to the payment business in the future, we believe the current stock price excessively reflects risk.” The condition for internalizing PG functions requires securing a transaction volume of over 1 trillion KRW per month, and it is judged that very few e-commerce companies in Korea can achieve this. He added, “Considering the cost and difficulty of securing merchants and operating services, which are core to the PG business, the possibility of internalization, taking into account margin erosion, is slim.”

This year’s expected sales and operating profit are projected to grow by 6.9% and 9.5% year-on-year to 865.8 billion KRW and 107.3 billion KRW, respectively. This is due to increased transaction volume from high-profit merchants and the on-tact sector, expansion of new merchants in the non-face-to-face transaction area, and improved performance of major subsidiaries. KG Inicis expanded non-face-to-face transactions in the pharmaceutical sector last year, achieving an additional monthly transaction volume of 100 billion KRW. This year, it is expected to evolve into an integrated online and offline payment service by expanding merchants into the interior and resort sectors through payment system advancement.

Researcher Choi stated, “Along with the performance growth of KG Mobilians, Hollis F&B, which was incorporated into the affiliate in November last year, will contribute to performance improvement as its operations normalize following COVID-19 restrictions.”