[Click eStock] "KakaoPay's 2Q Earnings Expected to Fall Short... Target Price Down 40%"

[Asia Economy Reporter Myunghwan Lee] Korea Investment & Securities announced on the 13th that it maintains a buy rating on Kakao Pay but lowers the target price by 40.6% from the previous 160,000 KRW to 95,000 KRW. This is due to the expectation that Kakao Pay will post disappointing results in the second quarter of this year.

Korea Investment & Securities projected Kakao Pay's second-quarter revenue and operating loss to be 133 billion KRW and 7.4 billion KRW, respectively. While revenue increased by 21.8% year-on-year, the operating loss continued. The operating loss exceeded the market estimate of 3.4 billion KRW.

By business division, the payment division's revenue is expected to increase by 39.5% year-on-year to 96.4 billion KRW. The second-quarter transaction volume of Kakao Pay is estimated to have grown by 19.7% year-on-year to approximately 29 trillion KRW. It is forecasted that payment-related transaction volume will reach an all-time high. Korea Investment & Securities evaluated that Kakao Pay’s usage in various fields such as offline would mitigate the impact of the slowdown in the e-commerce market. The financial division's revenue is expected to decline by 10.5% year-on-year to 30.2 billion KRW, but with an improvement in the loan market compared to the previous quarter, revenue is expected to rebound.

Korea Investment & Securities lowered its estimate for Kakao Pay's annual transaction volume from 124 trillion KRW to 120 trillion KRW, a 3.5% decrease from the previous forecast. The full-year 2022 revenue estimate was also revised downward by 9.7%. This reflects economic contraction due to macroeconomic uncertainties and the potential contraction of the loan market following the implementation of the third stage of the Debt Service Ratio (DSR) regulation. Estimates for financial service profits such as loan brokerage fees and fund sales commissions were also lowered due to sluggish loan and stock markets. The total operating expense estimate was reduced by 10.5% from 662 billion KRW to 592.6 billion KRW. The scale of commission expenses was lowered by 8.2% compared to previous estimates.

Researcher Hoyoon Jung of Korea Investment & Securities emphasized, "Attention should be paid to whether financial services recover in the second half of the year, driven by the recovery of growth rates in existing services such as loans and revenue contributions from new services such as insurance."

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