[Click eStock] Kakao's Operating Profit Margin Plummets Due to Increased Labor Costs... Target Price ↓

[Asia Economy Reporter Kwon Jae-hee] Hanwha Investment & Securities maintained its 'Buy' rating on Kakao on the 6th but lowered the target price to 130,000 KRW.

Kakao's Q1 performance this year recorded sales of 1.65 trillion KRW and operating profit of 158.7 billion KRW. This generally aligns with the lowered market expectations. TalkBiz sales increased by 23% year-on-year, showing a slowdown in growth due to last year's high base and the advertising off-season. However, Talk Channel advertising grew by 52%, maintaining a high growth trend due to the continued influx of advertisers who have experienced high efficiency. Platform and other sales increased by 52%, but mobility and Pay entered the off-season, and one-time blockchain-related sales recognized in the previous quarter were removed.

However, operating profit margin significantly declined due to a sharp increase in labor and marketing costs. Labor and marketing expenses rose by 43% and 70% year-on-year, respectively, resulting in an operating profit margin of 9.6%, down 2.9 percentage points compared to the same period last year.

So-hye Kim, a researcher at Hanwha Investment & Securities, said, "Kakao's stock price has fallen about 29% over the past month, reflecting concerns about profit growth slowdown due to declining sales growth rates in major businesses and increased costs." She added, "We expect the stock price to gain stronger upward momentum when signals emerge that new businesses aimed at strengthening global blockchain or content-related businesses are being concretized."

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