[Click eStock] "LG Uplus to Have the Best 2Q Performance Among the Top 3 Telecom Companies"

[Asia Economy Reporter Lee Jung-yoon] Hana Financial Investment maintained a buy rating and a target price of 20,000 KRW for LG Uplus on the 14th, expecting it to achieve the best performance among the three major telecom companies in the second quarter of this year.

Despite the influence of market interest rates and economic growth rates, LG Uplus is projected to continue high profit growth through 2023. Additionally, there is a high possibility that the management will reduce the number of dividend-eligible shares through share buybacks. The concerns over network competitiveness, such as the exclusion of Huawei equipment and the shortage of 5G frequencies, have also been alleviated, which is positive. Furthermore, among the three telecom companies, LG Uplus’s stock price has been sluggish this year, increasing its valuation appeal.

Kim Hong-sik, a researcher at Hana Financial Investment, explained, "LG Uplus has experienced a stagnant stock price due to relatively poor results in the fourth quarter of last year and the first quarter of this year, but the long-term profit growth and dividend increase trends are still maintained. The stock price is expected to continue a stepwise upward trend through 2023."

Moreover, LG Uplus is analyzed to achieve the best performance among the three telecom companies in the second quarter of this year. Regarding this, Researcher Kim said, "The negative base effect will disappear, and the sales growth rate will expand. Operating expenses such as marketing costs and depreciation expenses will continue to stabilize downward. Most importantly, competitors recorded excellent results in the first quarter, which places a heavy burden on their second-quarter performance, whereas LG Uplus does not have this disadvantage."

Improvement in the supply and demand for LG Uplus is also expected. Researcher Kim stated, "While institutional selling pressure is weakening, foreign buying is continuing. Although the possibility is not high, if the current stock price level continues throughout the second half of the year, share buybacks could be conducted after the end of the year or early next year." He added, "Despite rising interest rates, LG Uplus’s corporate bond borrowing costs are lower than the dividend yield, so reducing the number of dividend-eligible shares through share buybacks could be advantageous from a financial strategy perspective."