[Click e-Stock] "LG Uplus Expected to Recover 1 Trillion Won Operating Profit After 3 Years"

Active Treasury Share Acquisition and Cancellation... Shareholder Returns on the Rise

LG Uplus is expected to return to an operating profit of over 1 trillion won for the first time in three years. Among the three major telecom companies, it boasts the highest growth rate in its wireless business and is also expected to strengthen shareholder returns.

On the 26th, Daishin Securities maintained its 'Buy' investment rating and a target price of 17,000 won for LG Uplus, citing these factors. The previous trading day's closing price was 12,640 won.

In the first quarter of this year, LG Uplus posted consolidated sales of 3.7481 trillion won and an operating profit of 255.4 billion won. Compared to the same period last year, these figures increased by 4.8% and 15.6%, respectively, marking a successful rebound in performance. Having overcome negative growth caused by depreciation expenses in 2023 and 2024, the company is expected to surpass 1 trillion won in operating profit this year. Achieving an annual operating profit of over 1 trillion won would be the first time in three years since 2022.

The growth of the wireless business played a crucial role. From 2020 to 2024, the average annual growth rate of the wireless segment was 3.4%, outpacing KT (2.2%) and SK Telecom (1.9%) over the same period. This year, it is expected to grow by 2.2%. In comparison, KT is projected to increase by 1.5%, while SK Telecom is expected to decrease by 1.9%. The average revenue per user (ARPU) based on mobile phones, disclosed since the first quarter of 2023, was 34,500 won in the first quarter of this year, surpassing KT’s 34,800 won.

Strengthening shareholder returns is also anticipated. From this year through 2029, total shareholder returns are expected to increase by an average of 10% annually. The basic dividend payout ratio is expected to be 40%, with the company also anticipated to acquire and cancel 0-20% of its net profit in treasury shares. Next month, the company plans to cancel all 6.78 million treasury shares it currently holds, worth about 85.3 billion won. Additional treasury share acquisitions and cancellations are also expected in the future.

Based on a total shareholder return ratio of 50%, the year-end payout is expected to be 310 billion won, yielding a return of 5.6%. If the total shareholder return ratio increases to 60%, the yield will rise to 6.9%.

Kim Hoejae, a researcher at Daishin Securities, stated, "Operating profit, shareholder returns, and net foreign buying are all increasing, and the stock price is also showing an upward trend. Although the current share price has paused after reaching a 52-week high, the price-earnings ratio (PER) remains at an attractive valuation level of around 8 times."