[Click eStock] "Kakao, Highlighting Momentum from Earnings Improvement and Subsidiary IPO"

SK Securities Report

[Asia Economy Reporter Minji Lee] On the 16th, SK Securities issued a buy rating and a target price of 140,000 KRW for Kakao. This judgment is based on the belief that the mid- to long-term growth trend remains valid despite the sharp rise in stock price following the stock split.

Kakao's first-quarter revenue is expected to reach 1.2009 trillion KRW, a 38.3% increase compared to the same period last year. Operating profit is forecasted at 148 billion KRW, a 67.8% growth. Although the first quarter is traditionally an off-season for the advertising sector, high growth momentum is expected to continue across all divisions following last year. The operating profit margin is projected to be 12.3%, marking nine consecutive quarters of profitability improvement.

Choi Gwan-soon, a researcher at SK Securities, said, "Although there are factors increasing marketing costs due to expanded investments in commerce and content this year, revenue growth will offset the cost increase, and operating profit is expected to increase by about 70% compared to the previous year."

Kakao's major subsidiaries are on the verge of going public. KakaoBank has submitted a preliminary review application for listing on the Korea Exchange, with an expected listing around July to August. With a net profit of 113.6 billion KRW last year, it is traded at over 30 trillion KRW in the over-the-counter market, which is expected to contribute to an increase in corporate value.

KakaoPay is also scheduled to submit a preliminary review application for listing within this month, and Kakao Entertainment is raising the possibility of listing not only in Korea but also on the U.S. stock market, so the value of Kakao's major subsidiaries is expected to be continuously highlighted.

Researcher Choi said, "The value of Kakao's major subsidiaries will continue to be emphasized," adding, "Reflecting the increase in the number of shares due to the stock split, the launch of Kakao Entertainment, and the expansion of KakaoPay's trading volume, the stock price is expected to show an upward trend."