Hana Securities said on the 28th that KT lacks catalysts that could immediately lift its share price and that investors should look beyond next year and take a long-term view. It maintained a Buy rating and its existing target price of 76,000 won. KT closed the previous trading day at 53,400 won.
Kim Hong-sik, an analyst at Hana Securities, said, "There is a shortage of catalysts for a short-term share price rise," and added, "We recommend a long-term investment of more than one year based on price merit." However, KT's operating profit is expected to continue to increase this year, and the company kept a Buy rating in consideration of improved earnings capacity at subsidiaries and undervaluation on a price-to-book ratio (PBR) basis.
Hana Securities cited as the biggest reason for KT's weak share price the disappearance of last year's anticipated catalysts, such as a long-term stabilization trend in labor costs and related expenses and expectations for continued increases in dividends.
This year, KT returned 2,300 employees who had been assigned to the KT total operations task force (TF) to their main duties and said labor costs could shift back to an upward trend from this year. This differs from early 2024, when it had hinted at entering a long-term declining trend in labor costs. The conversion of treasury share repurchases and cancellations into dividend payments that investors had expected also did not occur.
Kim said, "If the aggregate amount of dividends jumps sharply for a time, there seems to be concern about the burden of lowering them again," and noted, "The problem is that with powerful catalysts such as long-term profit growth and dividend increases disappearing, there is no longer a compelling reason to buy KT this year." The share price level is not burdensome, but there is a lack of momentum to lift the stock in the short term.
However, rather than selling at the current price level, a long-term buy looking to 2027 and beyond was recommended. That is because this year's excitement over 5G standalone (SA) could shift from telecom equipment stocks to telecom service stocks.
Kim said, "In 2027, as the likelihood increases in Korea of additional 5G spectrum auctions and a revamp of rate plans centered on artificial intelligence (AI), telecom companies' average revenue per user (ARPU) is expected to rise again," adding, "As growth expectations could build, a strategy of holding KT through next year remains valid."