Consumers' Dependence on NAVER Increasing
The author is an analyst of NH Investment & Securities. He can be reached at jaemin.ahn@nhqv.com. -- Ed.
Consumers’ Internet usage patterns have changed due to Covid-19, with the dependence on NAVER, Korea’s number-one platform operator, increasing. Utilizing its portal platform, the company is also expanding its influence in the commerce, fintech, and webtoon markets.
No.1 Internet player also takes top spots in commerce, fintech, and content markets
We maintain a Buy rating and TP of W330,000 on NAVER. The firm’s enterprise value is rapidly increasing as the influence of Internet companies is greatly expanding, not only in the digital advertising field, but also in the commerce, fintech, and webtoon arenas. As that NAVER is the number-one Internet player, we expect its enterprise value to grow significantly.
Still much to show in 2020
At its Jul 1 Analyst Day, NAVER unveiled both its mid/long-term strategies and results for its commerce, NAVER Financial, and NAVER Webtoon businesses.
Commerce: NAVER’s Smartstore has been growing faster than expected due to Covid-19. Recently, the service recorded 18mn total visitors and 10mn total purchasers (+32% y-y) per month. In addition, monthly Plus Membership transactions have risen. Furthermore, the number of Brand Store alliances has climbed to 75, and the Live Commerce service is likely to expand in earnest. NAVER also plans to open grocery shopping service in partnership with Hyundai Department Store and Hanaro Mart in Aug 2020.
Financial: The number of people using NAVER Pay reached 12.8mn (+23% y-y) in May 2020, with the firm seeing significant hikes in both payment and point payment amount. Offline payment services will be released in 2H20. NAVER will also enter the MyData market by offering MyAsset and credit information inquiry services. Furthermore, it has strengthened lock-in effects for shopping and payment users via NAVER Account.
Webtoon: Backed by its merger with Japan’s Line Manga and the relocation of its headquarters to the US, NAVER Webtoon has expanded its global presence. The business recorded 64mn MAU in May 2020, and is likely to surpass W800bn in content transactions in 2020. NAVER Webtoon hopes to solidify its position as a platform by fostering amateur as well as professional writers. Moreover, it aims to expand its global IP arm.
2Q20 OP to fall slightly short of consensus due to slowdown in advertising industry
We forecast 2Q20 sales of W1.75tn (+7.3% y-y, +1.0% q-q) and OP of W213.6bn (+66.5% y-y, -3.6% q-q), with OP likely missing our previous estimate (W226.5bn) and consensus (W227.9bn) due to: 1) a jump in marketing expenses upon the launch of NAVER Account and Plus Membership; and 2) a slowdown in revenue due to stagnant advertising industry conditions, despite a hike in commerce transactions.