[Edaily Reporter Shin Ha-yeon ] On the 12th, Shinhan Investment Securities assessed that NHN(181710)is establishing its NeoCloud business as a new growth engine as it rapidly generates revenue, while its restructuring has entered its final stages. The firm maintained its “Buy” investment rating and raised its target price by 40% from the previous 45,000 won to 63,000 won.

Kang Seok-oh, an analyst at Shinhan Investment Securities, stated, “The company has entered the final stages of its restructuring and has demonstrated the growth potential of its NeoCloud business,” adding, “We expect market interest and the stock price to continue rising as it achieves the fastest monetization of its AI Factory in Korea.”

NHN reported second-quarter operating revenue of 757.9 billion won, up 25.3% year-over-year and 12.9% quarter-over-quarter. Operating profit reached 57.9 billion won, rising 164.2% and 120.6%, respectively. The operating profit margin stood at 7.6%. Notably, operating profit exceeded the market consensus of 42.9 billion won by 35%.

Strong performance in the gaming and cloud segments drove the positive results. In the gaming segment, the results reflected higher payment limits following the relaxation of regulations on web board games, as well as the success of the “Compass” collaboration update. In the payments segment, growth in transaction volume continued, driven by Payco’s highly profitable meal voucher business and the influx of new merchants to KCP.

In the technology segment, revenue from the artificial intelligence (AI) graphics processing unit (GPU) business began to be reflected in earnest. With the start of NVIDIA B200 supply at the Yangpyeong region, NHN Cloud grew by 85% year-over-year.

Analyst Kang explained, “NHN Cloud plans to continue expanding its infrastructure to actively respond to medium- to long-term demand,” adding, “Discussions are underway for new long-term contracts regarding the remaining capacity in the Yangpyeong region, and the company plans to secure an additional AI data center (DC) with a capacity of at least 30 MW by next year.”

Higher-than-expected AI data center (DC) prices and margins, along with rapid revenue recognition, also boosted earnings forecasts. Shinhan Investment Securities raised its operating profit estimates for NHN by 19.1% for this year and 19.8% for next year. Analyst Kang predicted that the AI Factory “will serve as a growth driver for the next few years.”

NHN’s operating revenue for this year is projected to reach 2.9972 trillion won, a 19.1% increase year-over-year, while operating profit is expected to rise 51.5% to 200.5 billion won. For next year, the firm forecasts operating revenue of 3.2648 trillion won and operating profit of 237.2 billion won. The operating profit margin is projected to rise from 5.3% last year to 6.7% this year and 7.3% next year.

The target price increase reflects the effects of restructuring and the growth potential of AI Factory. The target price of 63,000 won was calculated by applying a target price-to-earnings ratio (PER) of 15 times to the 12-month forward earnings per share (EPS) of 4,195 won.

Analyst Kang noted, “The company achieved a surprise-level turnaround as the effects of divesting underperforming businesses coincided with the success of its AI Factory,” adding, “As it has succeeded in monetizing its business faster than any other domestic neo-cloud provider, investor interest is expected to rise.” He further added, “If the cloud’s growth momentum continues, a revaluation of the currently low P/E ratio can also be anticipated.”