[Click e-Stock] "LG Uplus Expected to Surpass 1 Trillion Won in Operating Profit This Year... Target Price Up"

On July 15, NH Investment & Securities raised its target price for LG Uplus from 15,000 won to 20,000 won, projecting that the company’s operating profit will surpass 1 trillion won this year. The investment opinion was maintained as 'Buy'.

Ahn Jae-min, a researcher at NH Investment & Securities, explained, "A net increase in subscribers has been observed due to a hacking incident at a competitor, which is driving growth in service revenue. In addition, the company's own cost control efforts are expected to result in solid profit growth. We estimate this year's operating profit at 1.1 trillion won, up 28.1% from the previous year."

The telecommunications service sector continues to perform well. Ahn stated, "As the 5G investment cycle is entering its final stage, a favorable industry environment for telecom operators is persisting. Moreover, the recent cyber breach incident at a competitor has led to a continued net inflow of wireless subscribers, which is expected to drive both revenue and profit growth."

LG Uplus is expected to post its highest-ever quarterly operating profit in the second quarter of this year. Ahn noted, "For the second quarter, LG Uplus’s service revenue is expected to reach 3.1 trillion won, up 5.4% year-on-year, and operating profit is projected at 298.1 billion won, a 17.3% increase, exceeding the consensus estimate of 269 billion won. It is understood that approximately 800,000 subscribers left SK Telecom by the end of the second quarter due to the hacking incident, with more than 40% of them switching to LG Uplus. As a result, mobile service revenue is expected to grow by 3.2% year-on-year to 1.64 trillion won." He added, "Marketing expenses are estimated at 563.4 billion won, up 8.0%, but marketing cost per subscriber is not believed to have increased significantly despite the rise in subscribers."

The shareholder return rate is also still considered attractive. Ahn commented, "Although the dividend yield has fallen to 4.3% (assuming a dividend of 650 won per share) due to the recent share price increase, considering the cancellation of 6.78 million treasury shares mentioned since the beginning of the year, the shareholder return rate remains attractive at 5.8%."