[Edaily Reporter Kim Hyung-il ] EUGENE INVESTMENT & SECURITIES maintained its “Buy (BUY)” investment rating and target price of 73,000 won for KTCorporation(030200). While short-term earnings are expected to be weak due to declining profitability in the wireless business resulting from customer compensation programs, the firm forecasts that the expansion of the data center business and a reduction in depreciation expenses will support future earnings improvement.

On the 15th, Lee Chan-young, an analyst at EUGENE INVESTMENT & SECURITIES, estimated that KTCorporation’s consolidated revenue for the third quarter of this year would be 7.1174 trillion won, a 0.1% decrease year-over-year, while operating profit would decline by 4.9% to 512 billion won. These figures are slightly below the market consensus. This is due to the combined effects of reduced wireless profitability and increased selling expenses resulting from the customer compensation program that continued through July.

Wireless revenue is expected to decline by 2.4% year-over-year due to a drop in average revenue per user (ARPU) resulting from the customer compensation program. With the amortization burden from sales expenses—which rose last year due to intensified competition in the number portability market—persisting, related costs are projected to increase by 3.2% year-over-year. Consequently, operating profit on a standalone basis is estimated to decrease by 1.6% to 335.6 billion won.

The contribution to operating profit from consolidated subsidiaries is expected to be 176.4 billion won. KTCorporation Cloud is projected to continue double-digit growth year-over-year, driven by strong performance in the data center business, while KT Estate is expected to contribute to consolidated results based on revenue from the Daejeon development project and performance in the hotel business.

For the full year, consolidated revenue is expected to total 27.3756 trillion won, a 3.1% decrease year-over-year, while operating profit is projected to decline by 13.5% to 2.1362 trillion won. The high base caused by one-time gains related to the Gangbuk Development Project (NCP) in the previous year was cited as the primary reason for the apparent decline in performance. Excluding this factor, recurring operating profit is forecast to grow slightly.

With the impact of the customer compensation program set to fade starting in the fourth quarter, the firm anticipates that KT Cloud will maintain its double-digit growth momentum, and that a cycle of declining depreciation expenses—driven by the completion of depreciation for 5G equipment—will begin in earnest.

Given that meaningful profit growth will be limited this year, the annual dividend per share (DPS) is estimated to remain at 2,400 won, the same as last year. The second-quarter dividend is also expected to be 600 won, unchanged from the previous quarter.

The data center business was identified as a key driver of medium- to long-term growth. Analysts noted that plans are underway to secure an additional 1 gigawatt (GW) of data center capacity in line with KTCorporation’s announced strategy to expand its artificial intelligence (AI) infrastructure. Estimates suggest that if future data center construction plans sequentially translate into revenue, the operation of 1 GW could generate 4.1 trillion won in revenue and 500 billion won in operating profit.

The schedule for opening data centers is set to begin with the Bucheon 1 and 2 centers next year, followed by Gyeongbuk, Gunsan, and Yongin in 2028, and Ansan in 2029. The outlook suggests that as these related businesses generate revenue and the scale of revenue and profit from the 1 GW operation becomes more visible, this could serve as an opportunity for a revaluation of the company’s market value.

Analyst Lee Chan-young stated, “KTCorporation’s stock price has recently shown a sluggish trend due to a combination of reduced appeal as a dividend stock amid a high-interest-rate environment and weak core business performance resulting from customer compensation programs,” adding, “Expectations regarding the data center business are not yet fully reflected in the current stock price.” He added, “The colocation agreement with a top-tier global NeoCloud provider, expected to be announced within the year, could serve as a catalyst for a stock price rebound.”