[Click eStock] "Kakao, Subsidiary Slump... Target Price Down"

Hana Securities on the 9th said about Kakao, "While reassessing the corporate value of its subsidiary Piccoma, the equity value excluding the core business was adjusted from 23.7 trillion KRW to 17.9 trillion KRW," and lowered the target stock price from the previous 72,000 KRW to 60,000 KRW. The investment rating of Buy was maintained.

On the same day, Junho Lee, a researcher at Hana Securities, said, "KakaoTalk's core business showed steady growth, but marketing costs for Piccoma increased due to intensified competition in the webtoon platform market in Japan. The sluggish performance of subsidiaries including SM Entertainment and Kakao Games also had an impact."

Kakao's consolidated operating revenue for the second quarter is expected to be 2.0476 trillion KRW, up 6.5% year-on-year, and operating profit is expected to be 122.4 billion KRW, up 8.2%, but below market expectations. Lee said, "Platform segment revenue in the second quarter is expected to increase by 11.8% to 972.5 billion KRW, and Talk Biz revenue is expected to rise 8.4% to 520.5 billion KRW," adding, "In the advertising segment, Biz Board and Business Message are expected to continue to record performance exceeding the growth of the mobile advertising market, centered on performance-based advertising."

For the full year, operating revenue is projected to increase 12.1% year-on-year to 8.4726 trillion KRW, and operating profit is expected to rise 35.2% to 622.9 billion KRW. Lee emphasized, "The adoption rate of Business Message by advertisers in finance and commerce is increasing, so steady growth of the core business is expected," and added, "If new business models are added within Talk Biz, performance improvement could be accelerated."

He said, "Subsidiaries are in a cost-efficiency phase, so high sales growth is difficult to expect. Ultimately, core business growth and the potential of artificial intelligence (AI) services will be the key to stock prices in the second half of this year and the first half of next year," and noted, "Kakao has completed the business transfer of the AI division at Kakao Brain and established Kanana Alpha (AI model development) and Kanana X (AI service provision). It is now time to provide a concrete roadmap for AI services."

He added, "If differentiated intellectual property (IP) achievements from competitors are demonstrated, an upward revision of the target price is possible. Kakao's strength has always been its conversational text-based messenger targeting the entire population," and said, "This competitiveness remains valid even in the generative AI era within the smartphone form factor. Future reevaluation will be possible depending on the degree of concretization of AI services."