The author is an analyst for NH Investment & Securities. He can be reached at jaemin.ahn@nhqv.com -- Ed.
KT has unveiled its dividend policy for the next three years. The announcement should put to rest recent fears of dividend reduction. The firm’s commitment to keeping DPS at the 2022 level evidences its confidence in future earnings growth.
New dividend policy to resonate positively in market
We maintain a Buy rating and a TP of W44,000 on KT, continuing to offer the firm as our sector top pick. The company has officially disclosed plans to pay out 50% of adjusted non-consolidated NP in dividends and to maintain DPS at the 2022 level of W1,960. Concerns over a potential dividend reduction have harmed KT’s share price as of late, but such fears should now dissipate.
We particularly note KT’s show of confidence in its future earnings through its guaranteed DPS of W1,960 (even if sources of dividend are insufficient).
3Q23E OP to arrive short of consensus on one-off costs
On a consolidated basis, we expect KT to register 3Q23 sales of W6.83tn (+5.4% y-y, +4.3% q-q) and OP of W343.1bn (-24.2%y-y, -40.4% q-q), with OP missing both our previous estimate of W530.2bn and consensus of W455.6bn, affected by a new wage agreement.
We size 3Q23 sales for the wireless business at W1.56tn (+0.8% y-y, -0.1% q-q), with wireless ARPU likely reaching W33,499 (+1.8% y-y) amid stable growth driven by better qualitative subscriber growth than rivals.
We estimate that temporary labor costs of W100bn were incurred in 3Q23 in line with the new wage agreement, with labor costs likely climbing to W1.32tn (+22.6% y-y). However, selling-related expenses likely remained well under control at W674.5bn (+3.7% y-y, 5.9% q-q), despite the release of a new flagship smartphone model.