[Click eStock] Delay Buying Telecom Stocks Until After Year-End... Attractiveness Ranking: LGU+ > KT > SKT

[Asia Economy Reporter Lee Seon-ae] Hana Securities announced on the 30th that it will downgrade the investment attractiveness of the telecommunications service sector for September by one level to 'Neutral.' Although it believes that telecom stocks will record higher price increases compared to the market in 2023, it judges that there will be no events in the short term to drive stock price rises. In particular, the quarterly profit decline trend is expected to continue in the third quarter following the second quarter, and profit forecasts are likely to be revised downward, which is a burden. Regulatory conditions this fall are also not very favorable. The 5G tariff controversy is intensifying due to issues with 5G call quality combined with sluggish 5G CAPEX. With the National Assembly audit scheduled for September to October, the 5G tariff debate is likely to heat up once again. The fact that market interest rates have already risen significantly and expectations for economic stimulus policies are increasing also lowers the investment attractiveness of telecom stocks.

The investment attractiveness by stock for September is evaluated in the order of LG Uplus > KT > SK Telecom. Researcher Kim Hong-sik of Hana Securities presented LG Uplus as the monthly top pick. Researcher Kim said, "Among the three telecom companies, LG Uplus is the only one expected to show operating profit growth in the third quarter of 2022 compared to the same period last year and the previous quarter," adding, "This is because the activation of the 3.5GHz frequency band is expected to strengthen network competitiveness." He recommends buying at the 12,000 KRW level. For the time being, he also recommends box range trading for KT between 35,000 KRW and 40,000 KRW, and for SK Telecom between 50,000 KRW and 50,000 KRW.

There are not many telecom industry issues to watch in September. Major concerns are expected to include the Ministry of Science and ICT/ Korea Communications Commission National Assembly audit, sales trends of Samsung Galaxy Fold/Flip new phones, LG Uplus's investment and activation of the 3.5GHz frequency, discussions on the National Assembly's network free-rider prevention law, and K Bank's listing. Given this, the outlook for telecom stocks in September is not optimistic. Above all, the National Assembly audit is the biggest burden. Political interference in telecom company tariffs is unlikely to be viewed positively by investors. Strong sales of Samsung Galaxy Fold/Flip may raise expectations for long-term mobile phone revenue growth, but in the short term, it could increase concerns about marketing costs. It is difficult to view this positively only. Researcher Kim advised, "Regarding KT's K Bank listing issue, I also recommend lowering expectations in the short term," adding, "Considering the desired public offering price and stock market conditions, it will be difficult to proceed with the listing within this year."

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