[Click eStock] "Kakao Delivered Strong Q2 Performance... Advertising Revenue Expected to Grow"

[Asia Economy Reporter Lee Myunghwan] IBK Investment & Securities announced on the 5th that it maintains a buy rating on Kakao but lowers the target price from the previous 135,000 KRW to 110,000 KRW. The reasons are a decline in advertising revenue due to economic slowdown and a decrease in the value of subsidiaries. However, it forecasted that the core advertising business will see revenue growth.

Kakao's sales in the second quarter of this year recorded 1.82 trillion KRW, a 34.8% increase compared to the same period last year, and operating profit grew by 5.2% to 171 billion KRW. IBK Investment & Securities evaluated that these figures are in line with market expectations. The external growth was driven by platform and content segment revenues, which increased by 22.2% and 51.0% respectively compared to the same period last year, maintaining a strong growth trend.

In the platform segment, despite a 18.2% decrease in portal business revenue due to accounting changes, Talk Biz and other platform revenues grew by 16.1% and 52.4% respectively. Talk Biz showed growth with Biz Board revenue increasing by 20%, despite concerns over the economic slowdown. However, transaction-type revenue declined by 13.9% due to the endemic effect.

The content segment was analyzed to have driven overall growth with game revenue increasing by 162%. Music (11.3%), Story (22.1%), and Media (35%) revenues also rose. The game segment saw a sharp revenue increase due to the launch of 'Odin' in Taiwan and the early success of the new title 'Uma Musume'. The Story segment experienced a slowdown in revenue growth due to decreased domestic user activity.

Operating profit was limited in its increase relative to sales as labor costs remained similar to the previous quarter but other expenses rose significantly. Marketing expenses increased by 64.9% compared to the same period last year due to global business expansion in the Story segment and promotional costs for new game releases.

Researcher Lee Seunghoon of IBK Investment & Securities stated, "Advertising inventory will increase centered on open chat, and products will expand to search ads and video ads, leading to growth in the core advertising revenue." He added, "Not only the Story segment of webtoons and web novels but also overseas sales of various contents such as music and video are increasing, so high growth is expected mainly in the global market."

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