[Click eStock] "KT Faces One-Off Hacking Costs... Buy After Late November Is Appropriate"

Target Price Revised Downward

On September 25, Hana Securities stated that while it maintains a 'Buy' recommendation for KT, it is advisable to delay the timing of purchase until after the end of November, as the scale of one-off costs related to the hacking incident has become clearer, making a temporary decline in investor sentiment inevitable. The target price was revised downward by 7%, from 70,000 won to 65,000 won.

Hana Securities predicted that KT's performance will decline starting from the third quarter. While consolidated operating profit reached 1 trillion won in the second quarter, it is expected to fall short of the market consensus of 547 billion won in the third quarter due to wage increases and other factors. Kim Hongsik, a researcher at Hana Securities, stated, "Even assuming that hacking-related costs are not reflected, third-quarter consolidated operating profit is expected to be 513.1 billion won, representing an 11% increase year-on-year but a 49% decrease quarter-on-quarter. If there is talk of these costs being reflected in the third quarter or this year’s results, investor sentiment will be further dampened."

Regarding fourth-quarter performance, Hana Securities commented, "Compared to the SKT incident, it is difficult to expect that the hacking-related costs will remain insignificant, making the outlook even darker," and added, "We plan to lower our earnings estimates after the announcement of fines by regulatory authorities and KT’s own compensation plan."

However, the firm assessed that KT’s long-term investment appeal remains high, citing an increase in long-term dividends per share (DPS) and shareholder returns as the reasons. Kim explained, "With a reduction in operating expenses, the parent company's operating profit is expected to rise and dividend increases are likely to continue. In addition, the scale of profits generated by subsidiaries is growing, and it is essentially confirmed that KT will repurchase and cancel a total of 1 trillion won worth of treasury shares by 2028." He further added, "If treasury share cancellation becomes difficult, it is highly likely that the funds will be converted into dividends and paid out in full. For KT, which is currently unable to cancel treasury shares due to foreign ownership limits, this could be a significant factor."

The company forecast that a full-fledged rebound in KT’s stock price will likely occur after the end of November. Kim stated, "As the approximate scale of hacking-related costs becomes clearer and the announcement of next year’s value-up policy is expected, this will likely boost expectations for a rebound in KT’s share price, even though expectations for a DPS increase next year have diminished." He also pointed out, "Early next year, the announcement of plans for new domestic frequency allocations and the anticipated launch of new mobile phone plans are likely to drive multiple expansion."