IBK Investment Securities forecast on the 10th that KT's consolidated operating profit for the second quarter would fall 41.9% year-on-year to 589.3 billion won, while revenue would decline 8.8% to 6.774 trillion won over the same period.
Both figures fall slightly short of the market consensus — revenue of 6.892 trillion won and operating profit of 613.6 billion won. The brokerage cited two principal drags: the cost of a customer-appreciation package and a high base effect from property-sale revenues booked in the same quarter last year. There is also a risk that a regulatory fine related to a personal-data breach, expected to be finalised in July, could be charged against second-quarter results.
On a standalone basis — excluding subsidiaries — operating profit is expected to drop 19.9% to 375.6 billion won. IBK attributed part of the decline to KT's customer-compensation programme, launched in February, under which subscribers received 100GB of free mobile data per month. The scheme prompted some customers to downgrade their data plans, and the full-quarter impact of that revenue drag is expected to show up in the second-quarter figures.
Earnings from group subsidiaries are forecast to tumble 60.9% to 213.7 billion won. The main culprit is the absence of revenues generated last year from a residential property development in Jayang-dong, Seoul, which contributed 770 billion won in sales at an operating margin of roughly 50% — a benchmark that flatters no comparison.
IBK expects the headwind from the customer-compensation programme to persist into the third quarter. Nevertheless, it noted that KT's share price has already fallen roughly 20% from its recent peak, suggesting that much of the bad news is already priced in.
The brokerage argued that the downside for KT's shares is limited by two factors: a guaranteed minimum annual dividend of 2,400 won per share, implying a dividend yield of 4.1% at current prices, and an ongoing share-buyback programme worth 250 billion won, which is approximately 60% complete. KT has also announced plans to invest around 5 trillion won over the next five years to expand its artificial-intelligence data-centre capacity from 163 megawatts to 1 gigawatt.
Taking these medium- to long-term growth prospects into account, IBK Investment Securities maintained its buy recommendation on KT with a target price of 75,000 won. The stock was trading at 58,000 won on the day of the report.