[Edaily Reporter Kim Kyung-eun ] On the 12th, NH INVESTMENT & SECURITIES raised its target price for NHN(181710)by 29.6% from 54,000 won to 70,000 won, citing the company’s proven high profitability in its cloud business. The firm maintained its “Buy” rating.

Ahn Jae-min, an analyst at NH INVESTMENT & SECURITIES, stated, “The outstanding profitability of the cloud business, as confirmed by the second-quarter earnings, is expected to continue for the foreseeable future,” adding, “As the only domestic neo-cloud provider currently generating substantial revenue, a revaluation of the company is anticipated.”

NHN’s second-quarter revenue rose 25.3% year-over-year to 757.9 billion won, while operating profit surged 164.1% to 57.9 billion won. Operating profit significantly exceeded both NH INVESTMENT & SECURITIES’ previous estimate of 42.1 billion won and the market consensus of 42.9 billion won, marking an “earnings surprise.”

Amid balanced growth across all business segments, the improvement in the technology business’s performance stood out. Second-quarter revenue from the technology business reached 159.8 billion won, up 52.9% year-over-year and 27.1% quarter-over-quarter. Analysts assess that the company has laid the groundwork for mid- to long-term growth, centered on its graphics processing unit (GPU) business.

Revenue from the gaming business reached 139.6 billion won, a 21.5% increase year-over-year. Revenue from the payment business stood at 393.9 billion won, down 27.3% year-over-year but up 9.3% quarter-over-quarter.

NH INVESTMENT & SECURITIES particularly highlighted the growth potential of the artificial intelligence (AI) data center business. It raised its revenue estimate for the AI data center business this year by 25%, from 80 billion won to 100 billion won. Given that the cloud business benefits significantly from operating leverage—where fixed costs decrease as revenue increases—the firm projected that the business could achieve an operating profit margin of 20% in the future.

The firm also presented its earnings outlook for NHN this year, projecting revenue of 3 trillion won and operating profit of 212.2 billion won. These figures represent year-over-year increases of 20.0% and 60.3%, respectively.

Analyst Ahn stated, “Given the nature of the cloud business, revenue growth will lead to a steep operating leverage effect,” adding, “We have raised our earnings forecasts and target stock price in light of the upward revision to AI data center revenue estimates and the profitability of the cloud business.”