[Click eStock] "Naver, Growth Slowdown Due to Base Effect"

Policy-driven investment costs surged in the second half... Increase in labor and marketing expenses
eBest Investment & Securities "Naver target price lowered from 540,000 KRW to 500,000 KRW"

[Asia Economy Reporter Gong Byung-sun] Naver (NAVER) is expected to post fourth-quarter results last year that fall short of market consensus due to the base effect. This year's performance is also anticipated not to grow significantly beyond expectations.

On the 5th, Ebest Investment & Securities estimated Naver's fourth-quarter revenue last year to be 1.8854 trillion KRW, up 24.6% year-on-year, and operating profit to be 356.1 billion KRW, up 1.8% during the same period. The operating profit is about 8.62% below the consensus.

The base effect impacted growth. The search platform, commerce, and fintech sectors all slowed down at the beginning of 2020 due to COVID-19 but began growing from the third quarter of 2020, showing steep growth until the second quarter of last year. From the third quarter of last year, growth naturally slowed compared to the same period the previous year.

Additionally, from the second half of the year, policy-driven investment costs such as labor and marketing expenses surged. Labor costs are estimated to have increased significantly compared to the previous quarter due to headcount growth, the usual increase in fourth-quarter incentives, and carryover of unreflected amounts from the previous quarter. Marketing expenses also appear to have increased due to aggressive marketing of Webtoon and Line Manga. Seong Jong-hwa, a researcher at Ebest Investment & Securities, analyzed, “Policy-driven investment costs were unusually concentrated, and the consensus did not reflect this.”

This year's performance is expected to decline somewhat. Researcher Seong said, “Considering the stabilization of growth following COVID-19 recovery and aggressive investments in global platform businesses, the operating profit margin is likely to aim to maintain last year's level. However, from a mid- to long-term perspective, there is sufficient room for further growth.” Ebest Investment & Securities revised down Naver's first-quarter operating profit forecast for this year by 5.2% from the previous estimate.

Accordingly, Ebest Investment & Securities maintained its ‘Buy’ rating on Naver but lowered the target price from 540,000 KRW to 500,000 KRW. The closing price on the previous day was 365,500 KRW.

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