Online Shopping Market Expansion and Influx of Overseas Clients
The author is an analyst of NH Investment & Securities. He can be reached at
esshim@nhqv.com. -- Ed.
NHN KCP conducted an NDR for institutional investors over Apr 18~19. Despite concerns over slowing online market growth in the post-pandemic era, the firm’s earnings expansion should continue on the back of both a continued influx of global clients and market expansion following the emergence of a wide variety of online-based businesses (eg, online vehicle purchase and O2O). At the O2O business, strong growth is expected on the easing of social distancing measures.
Online shopping market growth and global client influx to continue
Despite concerns over slowing growth in the online shopping market, market expansion is expected to continue on the emergence of a wide variety of online-based businesses such as online vehicle purchase and O2O. Following on the launch of Disney+ last year, the influx of large global clients looks set to continue moving ahead, likely resulting in 42.7% y-y transaction growth for global players this year. Among overall transactions, the related transaction portion is forecast to climb from 11.9% in 2021 to 14.3% in 2022.
In line with the transition to an endemic phase, transaction amount should rebound on a business recovery for online travel agency (OTA) merchants such as Expedia, Hotels.com, and Trip.com alongside continued growth for OTT players such as Disney+, Amazon Prime, and Apple TV. In addition, payment business is anticipated from a wide array of other markets and industries. We note that the company was recently designated as a PG operator for Mercedes-Benz and BMW-certified preowned car business. Brisk O2O business expansion is also in the cards thanks to the easing of social distancing.
Qualitative growth begins again
We forecast NHN KCP’s 2022 sales at W885.4bn (+18.8% y-y) and OP at W52.6bn (+21.8% y-y; OPM of 5.9%). Amid ongoing payment market expansion, NHN KCP is to enjoy strong qualitative growth thanks to a continued influx of overseas clients. With earnings growth to sustain for the firm even in the endemic era, we believe that now is the time to pay attention to the shares.
In our view, the recent conflict in commission rates between credit card companies and PG firms should be considered a short-term issue. While P&L may be impacted in the near term, related effects should be limited in size. In terms of blockchain business expansion, though technical consultations and reviews are underway, the company will likely act conservatively until a legal and institutional basis is established.