[Click eStock] "LG Uplus, Sailing Toward First Ever Operating Profit of 1 Trillion Won"

5G Performance Smoothly Improving... Various Costs Also Stable

[Asia Economy Reporter Minwoo Lee] LG Uplus is expected to surpass operating profit of 1 trillion KRW for the first time ever this year. This outlook is based on steady growth in subscribers and average revenue per user (ARPU), while marketing and other expenses remain stable.

On the 14th, Daishin Securities forecast that LG Uplus will record sales of 3.504 trillion KRW and operating profit of 248 billion KRW in the first quarter of this year. These figures represent increases of 7% and 13%, respectively, compared to the same period last year. Operating profit is expected to rise by 41% compared to the previous quarter.

The core wireless business is progressing smoothly. Wireless market share surpassed 24% for the first time in October last year and has remained in the 24% range through February. Since the commercialization of 5G in April 2019, the monthly net increase was about 130,000 subscribers on average until last year, but this has risen to an average monthly net increase of 200,000 this year. As of February, the 5G penetration rate was 27.7%, ranking second after KT (29%). The ARPU for the first quarter is expected to be 30,800 KRW, a 0.6% decrease from the previous quarter but similar to the same period last year. The overall ARPU for this year is projected to increase by 3.3% compared to last year.

Marketing expenses are also considered stable. For the first quarter of this year, they are expected to be around 580 billion KRW. Researcher Kim Hoejae of Daishin Securities explained, "Due to the increase in net 5G subscribers, expenses will be higher than the 570 billion KRW in the first quarter of last year but lower than the 630 billion KRW in the previous quarter, which included year-end promotions."

Capital expenditures (CAPEX) this year are expected to remain below 2.5 trillion KRW. Although an average of 2.5 trillion KRW was spent annually in 2019?2020 due to 5G deployment, this year’s spending is expected to be lower. Depreciation expenses are estimated at around 1.95 trillion KRW. Researcher Kim said, "Because of damage processing in the 28 gigahertz (GHz) band, investment in 28GHz will not be significant for the time being, so the increase in depreciation expenses is expected to remain within 5% annually."

Considering these factors, Daishin Securities expects LG Uplus to achieve sales of 14.364 trillion KRW and operating profit of 1.031 trillion KRW this year. Operating profit is projected to increase by 16% compared to last year, surpassing 1 trillion KRW for the first time in history. The investment opinion 'Buy' and target price of 16,000 KRW were maintained. The closing price on the previous day was 13,100 KRW.