[Click eStock] "Naver, Strong Global Business Momentum Expected Next Year"

[Asia Economy Reporter Song Hwajeong] IBK Investment & Securities maintained its 'Buy' rating and target price of 560,000 KRW for Naver (NAVER) on the 21st, expecting stronger growth momentum in its overseas business next year.

Expectations are rising for the Japanese commerce and North American content markets next year. From the fourth quarter, Korea's Smart Store has been conducting beta service in Japan under the My Smart Store service. The official service is expected to start in the first quarter of next year, with the business entity being Line, a Japanese mobile messenger. Seunghoon Lee, a researcher at IBK Investment & Securities, said, "Line's monthly average users in Japan number 90 million, covering 70% of the total population," adding, "Since Yahoo Japan and Line are both under Z Holdings, which is accounted for by the equity method, synergy between the search service and My Smart Store is expected. Currently, a promotion waiving sales commissions for over a year is underway for tenant companies, so the number of tenants is expected to increase rapidly."

Additionally, global expansion based on webtoons and web novels is expected to accelerate. In the North American market, Naver Webtoon and Wattpad have secured 14 million and 94 million monthly users respectively, raising expectations for strong synergy between the two platforms. The researcher said, "More than 100 contents within the two platforms are already being adapted into videos through Wattpad Webtoon Studio," adding, "As Korean original contents such as Squid Game and Hellbound have commercially succeeded in the global market, Naver's storytelling platform will have greatly expanded opportunities to enter Western regions through various partnerships with global companies."

Naver's fourth-quarter performance this year is expected to meet market consensus. IBK Investment & Securities estimated Naver's fourth-quarter sales at 1.89 trillion KRW and operating profit at 393.4 billion KRW, representing increases of 25.1% and 21.4% respectively compared to the same period last year. The researcher explained, "The fourth-quarter advertising market is a seasonal peak, but due to the rapid spread of COVID-19, demand for leisure and performances has sharply declined, so the growth rate of the search platform is expected to slow slightly," adding, "However, high growth in commerce and content will continue due to the impact of COVID-19." However, marketing expenses are expected to continue increasing due to global content market expansion, leading to a decline in operating profit margin compared to the previous year.