[Click eStock] "Kakao, Profit Improvement Starting Next Year... Target Price Down"

Kiwoom Securities on the 19th lowered the target price for Kakao from the previous 78,000 KRW to 70,000 KRW. The investment rating was maintained as 'Buy.'

Kakao is estimated to have recorded sales of 2.1464 trillion KRW in the second quarter, an increase of 17.8% compared to the same period last year. However, operating profit for the same period is expected to have decreased by 31.4% to 117.3 billion KRW. Kiwoom Securities analyzed that this was influenced by Kakao's characteristic of having a relatively low proportion of search advertising and the lack of visible recovery in the advertising market due to complex issues in the second quarter.

From the second quarter, with the consolidation of SM, music business sales are expected to increase by 126.3% year-on-year to 473.5 billion KRW. However, operating profit is expected to remain limited due to increased AI and infrastructure costs and additional amortization of purchase price allocation (PPA) related to the acquisition of SM-related companies.

Jingu Kim, a researcher at Kiwoom Securities, said, "Since the performance variables through the consolidation of multiple affiliates are complex, additional review is necessary," adding, "As workforce efficiency measures at major Kakao affiliates continue from the second half of the year,

short-term one-time costs related to this will be added, but the profit improvement effect will be reflected from next year, and margin improvement is also expected to become visible from next year."

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