[Click eStock] "Regulatory Risks Persist for Kakao... Growth Pace Expectations Should Be Lowered"

Game and Advertising Continue High Growth... but Monetization of New Businesses Delayed Inevitably

Beom-su Kim, Chairman of the Kakao Board of Directors

[Asia Economy Reporter Minwoo Lee] Political criticism and various regulations are expected to delay the monetization timeline and listing schedule of Kakao's new businesses. There is an analysis suggesting the need to adjust expectations regarding the growth pace.

On the 16th, Samsung Securities lowered Kakao's target stock price by 10% to 180,000 KRW due to these factors, while maintaining a 'Buy' investment rating. The closing price the previous day was 122,500 KRW.

Kakao recently announced a plan to strengthen social responsibility on the 14th in response to criticism of excessive 'golmok sangwon' (small business district) infringement and tightened regulations on insurance service brokerage by its fintech subsidiaries. The plan includes ▲ alleviating concerns over fare increases by Kakao Mobility, ▲ withdrawing some services and establishing a mutual growth fund, and ▲ converting K Cube Holdings into a social enterprise.

Accordingly, Samsung Securities expects the monetization schedule of Kakao's new businesses to be somewhat delayed. They also evaluated that the existing business strategy of rapidly expanding business areas across the entire value chain centered on core services will inevitably need to slow down. Researcher Donghwan Oh of Samsung Securities stated, "In the long term, it will be possible to compensate for revenue lost from abandoned businesses by introducing new types of revenue models, but the pace of sales and profit growth will slow down somewhat."

The key issue is whether Kakao's response will quell public opinion and political criticism. In the case of Kakao Mobility, issues such as commission fees for affiliated taxis, dispatch discrimination against non-affiliated taxis, and K Cube Holdings' inadequate disclosure remain. This is why it is difficult to say that regulatory risks have been completely resolved.

There is an analysis that the direction of the business itself remains effective. Researcher Oh said, "The expansion of platform business models in mobility, fintech, and content sectors is a global trend, not just domestic, and platform regulations are being strengthened overseas due to opposition from existing operators during this process. Nevertheless, the industrial paradigm shift is a trend of the times, and although government regulations may slow the growth speed of platform businesses, they cannot change the direction."

However, he pointed out the need to adjust expectations for growth speed. Researcher Oh explained, "Advertising, gaming, and commerce sectors, which are relatively free from regulations, continue to experience structural growth, so Kakao's overall operating profit growth will continue regardless of regulatory controversies. However, since it is expected that Kakao will voluntarily slow down the monetization speed of new businesses in consideration of mutual growth, expectations for profit growth need to be lowered."

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