[Click e-Stock] "KT, the Cheapest Among Global Telecom Operators...Target Price Raised"

Target Price Raised from 67,000 Won to 80,000 Won

On February 19, NH Investment & Securities raised its target price for KT from 67,000 won to 80,000 won, saying the company is the most undervalued among global telecom operators. It maintained its investment rating of "Buy."

Ahn Jae-min, an analyst at NH Investment & Securities, said, "As the 5G investment cycle has ended and the profit recovery phase is in full swing, share prices of global telecom operators, including those in Korea, are continuing to rise," adding, "KT offers one of the highest levels of shareholder returns among global telecom operators (cash dividend yield of 4.0% and share cancellation of 3.1%), but its EV/EBITDA valuation, which reflects its cash generation relative to corporate value, stands at 4.1 times, which is significantly undervalued compared with the global major telecom operators' average of 7.1 times." He continued, "Although supply and demand are constrained due to the foreign ownership limit being fully used up, there are virtually no foreign investors left to sell, and the supply-demand dynamics from domestic investors are also favorable. In addition, the company plans to purchase treasury shares worth 250 billion won starting in March."

In the fourth quarter of last year, KT posted sales of 6.85 trillion won, up 4.1% year-on-year, and turned to a profit with operating income of 227.3 billion won. Wireless service revenue rose 5.3% to 1.74 trillion won, and KT Cloud revenue increased 25.8% to 277.9 billion won, driving earnings growth. Ahn noted, "Operating income exceeded the consensus (the average of securities firms' forecasts) of 209.9 billion won," and analyzed, "Although the costs of USIM replacement and customer compensation related to the data breach incident were reflected, excluding these, the company delivered solid results."

Steady earnings growth is expected to continue. Ahn said, "With the stable cycle of the core telecom business projected to last through 2029, steady earnings growth is anticipated, and additional growth is expected from large-scale data centers, which global telecom operators do not have (planned to be expanded to 300MW by 2028), as well as from the monetization of its real estate holdings."