[Click e-Stock] "NHN Expected to Benefit from Government AI Investment... Target Price Up"

Target Price Raised by 25% Compared to Previous Estimate

Korea Investment & Securities stated on June 13 that NHN is "a company expected to benefit from the government's expanded investment in artificial intelligence (AI)," maintaining its 'Buy' investment rating and raising the target price by 25.0% to 30,000 won.

Jung Hoyoon and Hwang Injun, analysts at Korea Investment & Securities, commented, "NHN is a leading provider in the public sector cloud market and, in particular, completed its server investment in the Gwangju AI Data Center in 2024." They added that President Lee Jaemyung, during his presidential campaign, pledged to invest 100 trillion won in AI projects to enhance the nation's AI competitiveness.

Regarding the reason for the target price increase, they explained, "The growth visibility of the cloud division has improved, and we have reflected the value of the cloud division in our existing SOTP valuation."

Looking at NHN's cloud revenue structure, out of the 414.3 billion won in revenue expected for 2024, approximately 60%, or 250 billion won, is generated from the domestic CSP (Cloud Service Provider) business. Of this, 70% comes from private PaaS (Platform as a Service) revenue, and 30% from sales to public institutions. The annual revenue from the Gwangju Data Center is estimated to be around 20 billion won.

They predicted, "With the government's increased budget for cloud transition and higher data center utilization rates, strong growth is expected. In particular, as the proportion of revenue from public institutions?which is relatively more profitable?increases, profitability is also expected to gradually improve." NHN's Japanese MSP business, Techorus, is also expected to maintain double-digit growth in 2025.

They further explained, "High profit-generating capability and relatively low valuation (undervalued compared to corporate value) make NHN sufficiently attractive within the current internet and gaming sector." They added, "It is a stock to watch in the sector during the second half of the year."