[Click eStock] "Kakao, Many Factors for Stock Price Increase in Second Half... Target Price Up 35%"

Hana Financial Investment Report

[Asia Economy Reporter Minji Lee] Hana Financial Investment on the 21st issued a buy rating on Kakao and raised the target price by 35% from the previous level to 190,000 KRW. This is based on the judgment that additional stock price increases will occur in the second half of the year due to various momentum.

Kakao has continued aggressive growth, recording a quarterly average year-on-year revenue growth rate of 40.3% over the past year. Specifically, the Talk Biz, centered on platform advertising and commerce, grew by 52%, and the core content, webtoons, grew by 69.2%.

Seungtaek Hwang, a researcher at Hana Financial Investment, said, “Not only existing services but also a turnaround in the financial and mobility sectors such as banking, securities, and simple payments is expected, and Kakao Entertainment is also growing by producing and distributing various contents,” adding, “Considering the ongoing ecosystem expansion and Kakao’s market competitiveness in each business, additional value appreciation is possible.”

First, Kakao Pay Securities is expected to improve fundamentals with the introduction of MTS. Currently, Kakao Pay Securities has secured more than 4 million entrusted accounts. If marketing based on KakaoTalk is added, rapid profitability is expected, which is also anticipated to have a positive effect on investment sentiment.

The re-merger of the Kakao Commerce division is also positive. Researcher Hwang explained, “As a strategy to respond to the mobile commerce market, since it is a closely related business that cannot be considered separate from the KakaoTalk platform, the synergy effect will also be significant,” and “market competitiveness will also be enhanced.” Kakao spun off Kakao Commerce in 2018 but plans to re-merge it back into the headquarters after three years. Mobility is expected to solidify the foundation for mid- to long-term growth. In addition to existing franchise taxis and designated driver services, it is expected to expand market dominance in the huge aftermarket sectors such as parking, maintenance, and electric charging.

Accordingly, Kakao’s stock price is expected to continue an upward trend. The improvement in supply and demand, such as inclusion in exchange-traded funds (ETFs) due to the recently increased market capitalization, is also positive. Performance improvement is expected to be highlighted after the second quarter, and the value increase of subsidiaries, including initial public offerings (IPOs), is also expected to contribute to improving investment sentiment. Researcher Hwang said, “The equity value of major subsidiaries, considering listing value and investment attraction value, will exceed 33 trillion KRW,” adding, “From a conservative perspective, we adjusted the target price by reflecting a 30% discount on the subsidiary equity value.”