[Click eStock] "Kakao, Profit High Growth Continues... Target Price 80,000 Won"

Hyundai Motor Securities maintained a buy rating and a target price of 80,000 won for Kakao on the 3rd, stating, "Due to the profit-generating ability of TalkBiz, cost reductions in new businesses, and increased profits from Kakao Entertainment, this year is expected to show a 23% increase in operating profit compared to last year."

On the same day, Kim Hyun-yong, a researcher at Hyundai Motor Securities, said, "'TalkBiz,' the 'cash cow,' is key because its profit-generating ability remains resilient against external pressures such as AI search and Ali·Temu's entry into the Korean market, compared to competitors."

Hyundai Motor Securities revised down Kakao's first-quarter profit forecast by 11% from the previous estimate. Kakao's first-quarter revenue is expected to increase by 25.2% year-on-year to 2.0324 trillion won, and operating profit is projected to rise by 87.6% to 117.4 billion won.

First-quarter platform revenue is expected to grow by 10.6% year-on-year to 938.3 billion won, with TalkBiz and new businesses achieving growth rates of 10.3% and 16.2%, respectively. Although the display advertising market has yet to rebound, messaging business revenue continues to grow steadily in double digits. The number of Talk Channels increased by 440,000 from the end of 2022 to 2.22 million in the fourth quarter of last year. Commerce also led transaction growth with a stable 50% share of delivery products in Gift Giving. New businesses maintained a solid mid-teens growth rate, while last year's intensive restructuring significantly reduced fixed costs in the enterprise segment.

First-quarter content revenue is expected to increase by 41.1% to 1.0941 trillion won, largely driven by the inclusion of SM Entertainment's consolidation, with music surging by 119.9%. Webtoons will maintain the profitability management trend shown last year, while efficient marketing investments will be made immediately after platform reorganization and integration are completed in key markets such as the United States.

Researcher Kim said, "The high revenue growth is mainly due to platform growth in addition to the effect of SM Entertainment's consolidation. TalkBiz and new businesses will contribute evenly." He added, "Operating profit is expected to decline quarter-on-quarter due to the base effect of labor costs and the start of amortization of the Ansan Internet Data Center (IDC), but compared to the same period last year, significant profit growth is expected thanks to the steady growth of the high-margin TalkBiz and improved profitability of Kakao Entertainment."