[Click eStock] "KakaoPay, Lower Growth Rate Than Expected... Target Price Down"

Shinhan Investment Corp. maintained its investment opinion of 'Buy' on Kakao Pay on the 24th, but lowered the target price from 74,000 KRW to 71,000 KRW.

Kakao Pay's consolidated sales for the first quarter of this year are estimated at 132.4 billion KRW, with an operating loss of 15.3 billion KRW. Operational normalization has been underway since the fourth quarter of last year, which was marked by overlapping negative factors. Profitability has recovered in the core payment and financial services sectors, but since the subsidiary securities and non-life insurance businesses are still in their early stages, expenses relative to sales remain high.

Separate sales are estimated at 123.1 billion KRW, with operating profit of 6.1 billion KRW. Due to the slowdown in the real estate market and decreased demand for new loans, financial services sales are expected to remain at 13.9 billion KRW, the same level as the previous quarter, while payment services sales are estimated to have increased by 1.8%. This is mainly due to an increase in overseas offline payments amid a continued slowdown in e-commerce-related sales. Accordingly, total payment volume (TPV) and revenue-contributing payment volume (RPTV) are estimated at 31.9 trillion KRW and 9.1 trillion KRW, respectively. Monthly active users (MAU) are expected to be 23.4 million.

Unlike other securities firms, Kakao Pay Securities focuses more on overseas stocks than domestic stocks, so it is expected to have lower earnings sensitivity to volatility in the domestic stock market, making an earnings surprise unlikely. However, with overseas stock trading increasing again since February and market share (MS) in overseas stocks expanding, there is a valid expectation for improvement in commission income. A real profit turnaround is expected to be possible when credit balances expand, but operating losses are inevitable until capital efficiency improves.

Heeyeon Lim, a researcher at Shinhan Investment Corp., said, “Offline payment increases driven by reopening and increased inbound and outbound travelers have already been confirmed, but it is regrettable that advertising services have not yet shown encouraging visibility and related sales increases are not significant.” She added, “Considering the lower growth rate compared to expectations and the decline in average revenue per monthly active user (ARPMAU), we are lowering the target price to 71,000 KRW.”

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