[Click eStock] "Kakao, Advertising Division Recovery Expected in Second Half"

Korea Investment & Securities Report

[Asia Economy Reporter Minji Lee] Korea Investment & Securities maintained a buy rating and a target price of 145,000 KRW for Kakao on the 6th. This is based on the judgment that while profit growth continues, focus should be placed on the recovery of the advertising division's growth rate in the second half of the year.

Kakao recorded sales of 1.65 trillion KRW, a 31.3% increase compared to the same period last year. Operating profit was 158.7 billion KRW, up 0.7%.

By segment, platform sales reached 886 billion KRW, a 27.4% increase year-on-year. Due to the off-season effect in advertising, the growth rate of Talk Biz sales fell by 6.6 percentage points quarter-on-quarter to 23.4%. Other platforms saw a decline in sales growth rate quarter-on-quarter due to a decrease in mobility sales.

Content sales amounted to 765.7 billion KRW, a 36.1% increase compared to the same period last year. Story sales grew 37.7% to 240.5 billion KRW during the same period, driving growth. The gaming segment recorded 245.8 billion KRW as Odin sales stabilized at a lower level.

Operating expenses rose 35.7% year-on-year to 1.49 trillion KRW. Labor costs increased 43.4% to 420 billion KRW, and marketing expenses maintained a high growth rate, rising 70.2% to 114.4 billion KRW.

Jung Hoyoon, a researcher at Korea Investment & Securities, explained, “The growth rate of Talk Biz has slowed compared to last year. Kakao still presents a guidance of 30-40%, but since the slowdown in the advertising division's growth rate is a global trend, it is necessary to confirm whether the growth rate will recover in the second half.”

Mobility and fintech are expected to see more full-scale growth in the second half. With the easing of social distancing, mobility demand is increasing, and Pay is expected to see a rebound in financial service growth rates if loan-related regulations are relaxed.

Researcher Jung said, “As macro uncertainties expand, investors’ interest in traditional indicators such as sales and profit growth rates is increasing. Kakao’s recovery in the advertising division’s growth rate and maintenance of high growth in new businesses will be key to stock price recovery.”

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