[Click e-Stock] "Kakao Maintains Strong Growth Despite Off-Season... Mobility and Dunamu Also Drive Positive Outlook"

Subsidiaries Like Mobility and Pay Also Achieve High Growth
Dunamu Equity Value Rises Along With Upbit's Boom

[Asia Economy, reporter Lee Minwoo] Despite the first quarter typically being an off-season, Kakao is expected to continue its robust growth this year, with balanced revenue increases across all sectors, including advertising, e-commerce, content, and mobility. Mobility revenue is steadily rising, and the value of Kakao's equity holdings is also expected to increase thanks to strong performance from Upbit, the cryptocurrency exchange.

On April 22, Yuanta Securities projected that Kakao would post consolidated sales of 1.2277 trillion won and operating profit of 156.3 billion won for the first quarter of this year. This represents a continued high growth rate, with sales and operating profit up 41.4% and 77.2%, respectively, compared to the same period last year.

As the economy recovers, revenue from Talk Biz Board, KakaoTalk's advertising platform, remains strong. At the same time, contactless (untact) consumption and mobile commerce (gift-giving) are also increasing. The expansion of Kakao T Blue franchise taxis is driving revenue growth for its subsidiary Kakao Mobility. Kakao Pay revenue is also increasing due to a rise in Kakao payment transactions, and content revenue-including from Piccoma in Japan-continues to show high growth.

Lee Changyoung, a researcher at Yuanta Securities, stated, "Although personnel expenses are expected to rise due to the spread of compensation demands-such as a series of wage increases among internet and gaming companies-and an increase in stock-based compensation costs (estimated at about 15 billion won in the first quarter) resulting from share price appreciation, the improvement in the earnings of consolidated subsidiaries like Mobility and Pay will continue to drive improvements in operating profit and operating margin this quarter."

In particular, Kakao Mobility recently received an investment of 56.5 billion won from Google, which valued the company at 3.4 trillion won. Lee explained, "Currently, Kakao T Blue, which uses a forced allocation system, is dominating the taxi-hailing market. Considering that, as of the end of last year, only 16,000 out of 250,000 taxis nationwide were Kakao T Blue, the growth potential remains high." He also noted that the introduction of a 99,000 won monthly membership fee for drivers and the high growth potential of Kakao Driver further contribute to the company’s significant growth prospects.

Upbit, the cryptocurrency exchange operated by Dunamu, in which Kakao holds a direct and indirect stake of about 22.4%, is also thriving. Upbit, the number one exchange in Korea, reportedly saw its average daily trading volume exceed 19 trillion won this month. This is comparable in scale to Coinbase, which is listed on the US Nasdaq with a corporate value of 70 trillion won. Dunamu's first-quarter sales are estimated at 590 billion won, with operating profit at 544 billion won (an operating margin of 92%), so Kakao, as the parent company, is expected to record equity-method gains of about 100 billion won in the first quarter alone.

Given these circumstances, Yuanta Securities maintained a 'Buy' rating on Kakao and raised its target price by 26.4% to 135,000 won. The previous day's closing price was 118,000 won. Lee commented, "This year, the high growth of the Piccoma webtoon business in Japan, domestic mobility business, mobile commerce, mobile advertising, and mobile finance will all drive improvements in subsidiary earnings and operating margins, while continued IPOs of subsidiaries will further boost corporate valuation."