[Click eStock] "NHN, Content Business Deficit... Investment Opinion & Target Price Down"

[Asia Economy Reporter Hwang Yoon-joo] Kiwoom Securities analyzed on the 19th that NHN's profit improvement speed in the content business division is slow. Accordingly, the investment opinion was downgraded from Buy to 'Outperform,' and the target price was lowered to 33,000 KRW.

Researcher Kim Jin-gu of Kiwoom Securities stated, "The profit improvement speed in commerce, technology, and content business divisions, aside from the gaming business, is slow."

Researcher Kim analyzed, "The Payco business has not been able to maintain a profitable trend, and as major competitors strengthen their offline payment businesses, there is a risk of additional unfavorable situations in the future."

He explained, "Currently, the technology and content businesses have not escaped operating losses. In the payment/advertising sector, the Payco business, which the company views as an important pillar of growth, has not maintained profitability. Despite the post-COVID increase in user outdoor traffic and the favorable changes in the offline environment that Payco focuses on, visible profit improvements have not been achieved."

Researcher Kim said, "Operating profit in the second half of the year is expected to approach the same level as the previous year due to margin improvements in the gaming sector following the easing of web board game regulations. The timing for quarterly operating profit to improve compared to the same period last year is projected to be the fourth quarter of this year."

He diagnosed, "This reflects some expectations for the fourth quarter, when new game releases are concentrated. However, if the performance of new releases is insignificant, there remains a risk that profit growth compared to the same period last year may not be possible."

Researcher Kim forecasted, "NHN's expected operating profit for 2022 is 73 billion KRW, a 25% decrease compared to the previous year, and the expected operating profit for 2023 is 104.1 billion KRW, a 43% increase compared to the previous year."

However, this is expected to only recover to the 2021 profit level, showing sluggish growth over two years.

He added, "Investors will need to monitor the speed of quarterly operating profit improvements going forward and adjust their investment weights accordingly."