Improvements in Earnings for Enterprise Infrastructure
The author is an analyst of KB Securities. He can be reached at joonsop.analyst@kbfg.com. -- Ed.
1Q21 earnings beat market consensus
— LG Uplus reported preliminary earnings, with revenue at KRW3.42tn (+4% YoY, -2.9% QoQ), OP KRW275.6bn (+25.4% YoY, +57.1% QoQ) and NP attributable to controlling interests KRW196.4bn (+35.4% YoY, TTB QoQ).
— OP was higher than our estimate (KRW250.0bn) as well as the market consensus (KRW238.0bn, FnGuide, 3m).
— Of note, revenue for Enterprise Infrastructure grew 9.0% YoY to KRW342.0bn.
— Meanwhile, Consumer Service (Wireless, Smart Home), despite subdued marketing spending, continued its top-line growth (+6.8% YoY to KRW2.03tn).
Improvements in earnings for Enterprise Infrastructure
— Revenue for Enterprise Infrastructure (B2B business) climbed 9% YoY to KRW341.5bn but fell 6.9% QoQ on seasonality for the Solutions business. Revenue for IDC (Internet Data Center), Solutions, and Enterprise Line increased by 8.4%, 11.3%, and 7.9% YoY, respectively.
— In particular, the Solutions business gained meaningful project references in the Smart Factory area, laying the foundation for future expansion.
— Meanwhile, LG Uplus disclosed as of May 11 its plans to invest KRW318.1bn in setting up a new IDC, which should serve as a key driver of growth over the long term.
Top-line growth at Consumer Service (Wireless, Smart Home) despite less marketing spending
— Marketing expenses fell 12.5% QoQ on the subdued influx of new subscribers (-2% QoQ to 1.25mn) and a reduction in per-subscriber marketing expenses. The proportion of marketing expenses relative to service revenue continued on a clear downtrend (24.1% in 1Q20 → 24.6% in 2Q20 → 25.3% in 3Q20 → 24.8% in 4Q20 → 22.1% in 1Q21). The bundled service offering discounts depending on the number of family members (launched at the beginning of this year) curbed the churn rate, contributing to the stabilization of marketing expenses.
— The number of MVNO subscribers rose 13.3% QoQ to 2.15mn, driving up Wireless revenue.
— The number of subscribers for IPTV and broadband internet also rose 2.7% and 1.3% QoQ, respectively, thanks to diverse content offerings (e.g., live stream services for kids)—contributing to the top-line growth for the division.