[Click eStock] KT, Dividend Increase Due to Profit Growth... "Better Next Year"

[Asia Economy Reporter Lee Seon-ae] Samsung Securities announced on the 25th that it maintains a buy rating and a target price of 44,000 KRW (12-month forward price-to-earnings ratio (PER) of 13x) for KT. This is due to the wireless business's stable profit growth and the expectation of a recovery in the performance of subsidiaries such as real estate next year, driven by an improved external business environment. Additionally, the potential for dividend increases resulting from profit growth is a significant attractive factor. The dividend yield for this year is expected to be 5.0%.

Third-quarter revenue is expected to be 6.1706 trillion KRW (+2.8% YoY), and operating profit 371.9 billion KRW (+26.5% YoY), in line with market consensus. The wireless business is understood to have continued quality performance improvements due to steady net increases in 5G subscribers. Considering the current growth trend, the '45% 5G subscriber ratio' guidance set for this year appears achievable without difficulty. Although marketing intensity was higher than the previous quarter due to the launch of a flagship model, it is estimated to have been within the expected range, typically around the level before and after new product launches.

On the cost side, related expenses are expected to reflect an increase compared to the same period last year due to the completion of wage and collective bargaining negotiations (wage and collective agreement) at the end of September. The B2B business steadily expanded its performance, led by IDC and others. Group company performance is expected to improve compared to the same period last year due to issues such as mergers between subsidiaries and increased marketing activities, but it is expected to be lower compared to the previous quarter.

Minha Choi, a Samsung Securities analyst, stated, "KT will continue its growth trend in 2022 through the expansion of the 5G subscriber base and growth in the AI/DX sector driven by increased IDC demand," adding, "The amortization period for marketing expenses is also shorter at 21 months compared to competitors, so the burden of a sharp increase in marketing expenses due to intense competition in the early commercialization phase in 2019 will be relatively alleviated earlier."

She continued, "The media business will show tangible results from the restructuring centered on KT Studio Genie," and added, "The financial business, including K-Bank which turned profitable in the second quarter, is also expected to expand its growth pace."