Shinhan Investment & Securities said on the 16th that KT's first-quarter results are expected to come in below expectations due to the hacking incident's impact, but that a gradual rise in the share price will likely continue on the back of share buybacks.
At the same time, it maintained a "Buy" investment rating and raised the target price to 75,000 won from 72,000 won. KT's closing price in the previous session was 64,400 won.
Kim Aram, an analyst at Shinhan Investment & Securities, said, "About 230,000 subscribers left during the penalty waiver period," and noted, "As the company offers a benefit of 100 gigabytes (GB) of data for six months, average revenue per user (ARPU) appears to be falling temporarily."
For this year, KT's first-quarter revenue is expected to be 6.74 trillion won and operating profit 517.3 billion won. Compared with the same period a year earlier, revenue would be down 1.5% and operating profit down 24.9%. Operating profit is projected to fall short of the market consensus of 520.4 billion won.
However, selling expenses are expected to increase 7.5%. KT amortizes selling expenses over 21 months, the shortest among the three mobile carriers, because subscriber churn has accumulated since the SK Telecom hacking incident.
In addition, there are one-off expense drivers such as usage-based settlement costs in the customer appreciation package, research and development (R&D), and the recomputation of maintenance fees at the network subsidiary.
Kim said, "Results are expected to improve in the second half as the new chief executive officer (CEO) system stabilizes," forecasting a first-quarter dividend per share of 610 won.
KT began a 250 billion won share buyback on the 1st of this month. As part of its value enhancement plan (value-up program), KT is pursuing a total of 1 trillion won in share buybacks and cancellations over four years starting in 2025.
Kim said, "The supply-demand effect is about 10% of the average daily transaction value, so at least during the share buyback period (Apr. 1–Sept. 9), a gradual rise in the share price is expected," adding, "It is regrettable that the foreign investor equity cap is full, but the American depository receipt (ADR) premium (a phenomenon where the price is higher than that of the underlying shares traded in the home market) still shows a preference for KT."