[Click eStock] "Kakao, Subsidiary Growth is Key... Target Price ↓"

[Asia Economy Reporter Myunghwan Lee] Korea Investment & Securities announced on the 2nd that it maintains a buy rating on Kakao but has lowered the target price by 13.8% from the previous level to 125,000 KRW. The reason for the target price downgrade is the decline in the stock prices of major listed subsidiaries, but the analysis emphasizes the need to monitor the growth of these subsidiaries.

KakaoTalk's TalkBiz growth rate in the first quarter of this year was 23.4%, significantly down compared to last year. Kakao has set the TalkBiz growth rate guidance for this year at 30-40%. Korea Investment & Securities analyzed that the decline in TalkBiz growth rate is due to the slowdown in commerce growth and reduced advertising spending by some advertisers. However, messaging ads such as Talk Channel and AlimTalk continued to achieve high growth of over 50% in the first quarter, and Biz Board is expected to boost revenue growth again through the expansion of its network advertising business.

The most important factor to consider in investing in Kakao is the growth of its subsidiaries, according to Korea Investment & Securities. In the past, valuation based on user metrics and transaction volume growth of Kakao subsidiaries was a key investment point. Currently, since all business units generate meaningful revenue and profitability has improved, the focus is on how much the growth of subsidiaries can contribute to Kakao’s overall operating profit. It was also noted that the new government’s platform industry policy direction favors self-regulation, creating a favorable environment for subsidiaries such as fintech and mobility to diversify their business models.

The background for the target price downgrade includes valuation adjustments due to the decline in stock prices of global peer companies and the drop in stock prices of major listed subsidiaries.

Researcher Hoyoon Jung of Korea Investment & Securities stated, "If platform regulations are generally eased, Kakao, which operates various businesses domestically while maintaining growth in its core business units, will be the biggest beneficiary," adding, "The recent valuation has fallen to the lowest level ever, making the downside risk limited, which is also attractive."

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