[Click eStock] KT, a Representative Asset Stock "No Impact from Cost Increase Inflation"

[Asia Economy Reporter Lee Seon-ae] Hana Financial Investment announced on the 23rd that it maintains a buy rating and a target price of 45,000 KRW for KT, presenting it as the top pick within the telecommunications services sector.

Kim Hong-sik, a researcher at Hana Financial Investment, emphasized, "Although there are significant concerns about cost-increase inflation driven by soaring raw material prices, the impact on KT is minimal, highlighting it as a representative undervalued stock compared to its intrinsic asset value in Korea."

The reasons for the recommendation include ▲ asset value appreciation and DPS increase leading to high stock price growth even amid stagflation ▲ continued traffic growth and APRU increase despite economic slowdown ▲ minimal impact from cost-increase inflation and a breakthrough opportunity for cost reduction upon restructuring into a business operator holding company ▲ absolute undervaluation considering asset value and expected dividend yield.

KT is a representative undervalued stock relative to its asset value in Korea. On the surface, its price-to-book ratio (PBR) is around 0.5 times, but this is based on book value, and there is a significant difference when considering the actual value of real estate and lines. This was evident in the fair value assessment of KT Estate a few years ago, and the recent case of the Seoul metropolitan cloud spin-off is a representative example. The book value was 900 billion KRW, but the actual fair value was assessed at 1.7 trillion KRW. The value of copper lines and carriers is similar. KT plans to recover and sell unnecessary lines in the future, and the valuation gains are expected to exceed the book value. There is one more variable to consider: the subscriber value of KT.

Considering the current cost per acquisition, the minimum subscriber value is over 6 trillion KRW. With this in mind, KT's actual PBR does not even reach 0.3 times. Researcher Kim stated, "The important point is that even now, due to great inflation, the prices of various lines, raw materials/IT components, and real estate worldwide are rising along with real assets," adding, "Moreover, KT is in a phase of rapid profit and dividend growth, with DPS increases and real asset value appreciation accelerating, which will lead to corresponding stock price increases."

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