[Click eStock] KT, Solid Earnings... Target Price Raised to 42,000 Won

[Asia Economy Reporter Lee Seon-ae] SK Securities announced on the 17th that it maintains a 'Buy' rating on KT and raises the target price to 42,000 KRW. This decision is based on the expected performance improvement in the second half of the year.

KT's Q2 results showed operating revenue of 6.0276 trillion KRW (2.6% yoy) and operating profit of 475.8 billion KRW (38.5% yoy, OPM: 7.9%). These results significantly exceeded market expectations. In particular, the operating profit was the highest since Q1 2012 and surpassed market estimates by 14%. With 5G subscribers reaching 5.01 million (35% of total handset subscribers), wireless service revenue increased by 4.5%, and IPTV subscribers exceeded 9 million, leading to a 14.5% increase in revenue compared to the same period last year. Especially, the group's profit rose sharply. The BC Card and Estate divisions, which had been sluggish due to COVID-19, turned around, increasing group profit from 89.2 billion KRW in the same period last year to 124.7 billion KRW in Q2.

The strong performance improvement trend is expected to continue in the second half. Compared to competitors, KT's high 5G subscriber ratio is driving a faster increase in mobile ARPU, and the growth in IPTV and high-speed internet subscribers, along with a slowdown in the decline of fixed-line phone revenue, demonstrates strong competitiveness in the telecommunications sector. Additionally, as the turnaround of major subsidiaries that struggled last year has been confirmed, KT's performance improvement is expected to remain valid in the second half.

Choi Kwan-soon, a researcher at SK Securities, said, "The surprise Q2 results have expanded the possibility of profit improvement in the second half, and expectations for dividend increases are also valid." He added, "Reflecting the upward revision of earnings estimates (applying the same target price-to-earnings ratio (PER) of 10 times), the target price is raised from the previous 37,500 KRW to 42,000 KRW." KT's expected dividend per share for this year is 1,450 KRW, which implies a dividend yield of 4.0% compared to the current stock price, the highest level within the telecommunications sector.

This content was produced with the assistance of AI translation services.