[Click eStock] "NAVER, Target Price Down 11% Despite Profitability Improvement Outlook"

DB Financial Investment Report

[Asia Economy Reporter Minji Lee] DB Financial Investment maintained its buy rating on NAVER on the 18th and set a target price of 400,000 KRW, down 11% from the previous target.

DB Financial Investment expects NAVER to record sales of 1.98 trillion KRW and operating profit of 338.3 billion KRW in the second quarter, representing increases of 19% and 1% respectively compared to the same period last year. These figures are slightly below market expectations of 2 trillion KRW in sales and 357.5 billion KRW in operating profit.

The search platform segment is expected to see a slowdown in growth due to a high base and decreased DA demand, and commerce, which has a high proportion of advertising, is also expected to have a lower sales growth rate. Fintech is expected to remain solid due to continued expansion of external payments, while content appears to maintain high growth, although this seems to reflect the effect of the consolidation of the e-book edition. On the cost side, profitability is expected to remain low compared to the previous year due to increased personnel and wage hikes leading to higher labor costs, continued marketing related to content, and infrastructure expansion related to IDC construction.

The commerce segment, which is the biggest concern, is expected to see a higher contribution to sales through monetization via merchant solutions and advertising as brand store transaction volume rapidly increases in the second half. There is also a possibility of an increase in brand store sales commissions, which is expected to be effective in expanding NAVER commerce sales in the mid to long term. Additionally, Cream (resale platform) is expected to start significantly contributing to sales through the application of sales and purchase commissions, leading commerce sales to increase at a rate exceeding transaction volume. Efforts to improve cost efficiency are becoming visible, and profitability is expected to improve in the second half.

However, the annual operating profit estimate was revised down by 13% from the previous forecast. Researcher Hwang said, “This reflects considerations such as the slowdown in advertising growth due to the economic downturn. However, profitability improvement is expected in the second half, and with a valuation at a low level of PER 25 times, a buy strategy on NAVER is still valid at this point.”

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