Solid Top-line Growth Expected to Continue
The author is an analyst of KB Securities. She can be reached at leesunhwa@kbfg.com. -- Ed.
Maintain BUY, target price of KRW250,000
We maintain BUY and TP of KRW250,000 on Naver. In 3Q22, focus defending OPM via cost efficiency despite difficult operating conditions. Also, Naver has been aggressive with its shareholder returns (e.g., special 4Q payout in November). We see solid top-line growth continuing amid macro uncertainty given growing e-commerce investments in Korea (launch of guaranteed delivery program in December), expanding MySmartStore business in Japan and the acquisition of U.S. social commerce marketplace Poshmark.
3Q22 review: OP in line with market consensus
Naver posted 3Q22 consolidated revenue of KRW2.06tn (+19.1% YoY, +0.6% QoQ) and OP of KRW330.2bn (-5.6% YoY, -1.8% QoQ; 16.1% OPM), which is in line with the market consensus of KRW326.2bn.
3Q22P revenue by segment: Search platform +8.0% YoY, Commerce +19.4% YoY, Fintech +22.5% YoY, Contents +77.3% YoY, Cloud -1.5% YoY
Revenue by segment: Search Platform rose 8.0% YoY. Despite slowing ad market conditions, revenue growth for search ads was solid at 10.6% YoY, following the segment’s long-term strategy. However, revenue growth for display ads, which is heavily affected by industry conditions, slowed to 2.3% YoY. Commerce surged 19.4% YoY on higher transactions for travel/reservations amid the reopening economy. Fintech jumped 22.5% YoY on an increase in settlements at offline merchants. Contents soared 77.3% YoY/3.9% QoQ on steady webtoon transactions. Cloud revenue slipped 1.5% YoY on a temporary suspension of CLOVA shipments despite stable increases in B2B order intake.
3Q22 OPM flat QoQ at 16.1% (vs. 2Q22 OPM of 16.4%)
3Q22 OPM remained flat QoQ (16.4%→16.1%), with labor costs flat QoQ (KRW433.7bn→ KRW433.5bn; slower hiring) and marketing costs down 0.6% QoQ (optimization of reward point accumulation program). Search Platform/Commerce OPM rose 0.9pp QoQ.