KT Overcomes Headwinds, Expected to Break Out of Undervaluation This Year [Click e-Stock]

Expectations Rise for Increased Shareholder Returns
Amid Separate Taxation on Dividends

This year, KT is expected to show the steepest upward trend among telecommunications companies. The negative impact from the hacking incident has already been factored into the market, and with one-off costs excluded, it is anticipated that the company will achieve strong profit growth and increased shareholder returns this year.

On January 6, Hana Securities raised KT's target price by 8.6% to 76,000 won and maintained its "Buy" rating, citing these factors. The previous day's closing price was 51,600 won.

Hana Securities highlighted that KT is a direct beneficiary of the third amendment to the Commercial Act and the implementation of separate taxation on dividends. The new management is also focusing on enhancing corporate value, leading to the analysis that dividends per share (DPS) will rise significantly.

The newly appointed CEO, Park Yoon-young, is scheduled to be confirmed at the shareholders' meeting in March. The first criterion for KT's board in selecting a CEO was to enhance corporate value. This means that, along with this year's performance, boosting the stock price has become increasingly important.

Given recent internal and external conditions, there is particular attention on the potential increase in DPS this year. With separate taxation on dividends already confirmed and the third amendment to the Commercial Act underway, the first dividend payment after the CEO change is scheduled for April. Hana Securities forecasts that KT's DPS this year will reach 900 won, a 50% increase from the previous year.

Kim Hongsik, a researcher at Hana Securities, explained, "Most minority shareholders would prefer dividend payments that can be properly valued and generate immediate cash flow, rather than buying treasury shares that cannot be retired. From the perspective of demonstrating exemplary compliance with regulatory policies, this approach should also be fully considered."

As of last year, KT was unable to immediately retire its treasury shares due to having reached the foreign ownership limit, unlike LG Uplus. Now, there is a higher likelihood that all shareholder returns will be distributed as dividends. It is analyzed that this creates an environment where the value of shareholder returns can be fully reflected in the stock price, allowing the company to move out of an undervalued phase.

Kim added, "The increase in shareholder return amounts was also the reason for KT's stock price rise in the second half of 2024 and the first half of last year. If we assume KT's stock price can rise to a level where the expected dividend yield is around 5%, it seems possible to expect it to reach 76,000 won within the first half of this year."