Earnings on Uptrend Thanks to Cost Controls
The author is an analyst of KB Securities. He can be reached at joonsop.analyst@kbfg.com. -- Ed.
3Q22 OP at KRW285.1bn (+3.0% YoY)
— LGU posted 3Q22 consolidated revenue/OP of KRW3.50tn (+0.7% YoY)/KRW285.1bn (+3.0% YoY). OP beat the market consensus (KRW274.9bn) but in line with our estimate (KRW290.2bn).
— No. of 5G subscribers reached 5.70mn (50.6% of LGU’s total mobile phone subscribers according to Ministry of Science and ICT). Wireless service revenue rose 1.9% YoY. Revenue from broadband internet improved 7.1% YoY thanks to new subscribers (+4.6% YoY) and higher ARPU.
— Investors are confident that the company will achieve full-year OP of KRW1.0tn.
Strategy for growth: U+3.0
— LGU’s U+3.0 strategy adapts to the rapidly changing telecom/media markets. With the accumulation of customer data via its various Web 3.0-based services, the company aims to increase the time users spend on its platforms.
— The “lifestyle” platform leverages LGU’s telecom subscriber base, offering data-driven “subscription” services and “routine” services. The “play” platform offers content/OTT services, and the “child development” platform provides IPTV Web-based service Kids World.
— The subscription/routine services should expand in earnest from 2H23.
— LG Uplus sees revenue from the play platform increasing to a meaningful level in 2023.
Earnings on uptrend thanks to cost controls
— Marketing costs rose 2.7% QoQ following the launch of flagship mobile phones but continued on its YoY downtrend at -0.3% YoY, reaching KRW565.0bn (21.5% of service revenue).
Smart factory providing qualitative growth
— For Enterprise Infrastructure, revenue for Solution/IDC/Enterprise Line reached KRW110.0bn (-4.8% YoY)/KRW70.0bn (+1.3% YoY)/KRW194.5bn (+4.8% YoY).
— Despite its YoY decline in revenue, Solution saw growth in new businesses, such as smart factory and smart mobility (i.e., AI-based services, motor diagnosis, facility maintenance).
— Revenue from SMEs should expand with the building of a smart factory for Seoul Technopark.