Investors Advised to Change Their Perspective
The author is an analyst of NH Investment & Securities. He can be reached at
esshim@nhqv.com. -- Ed.
Affected by fears over slowing growth in the online shopping market and a stock market downturn, NHN KCP shares are trading at a valuation similar to the pre-pandemic level. We suggest that it is now time to adopt a positive view, expecting the firm to enjoy ongoing growth even in the endemic era.
Earnings arrive solid, considering one-off costs
NHN KCP reported 1Q22 sales of W191.6bn (+14.6% y-y) and OP of W8.5bn (-6.5% y-y; OPM of 4.5%), with sales topping our estimate but OP falling a bit short. Even though online shopping market growth has slowed to +10.0% y-y due to high-base effect resulting from a peaking of Covid-19 effects last year, the company’s PG transaction value increased to W8.6tn (+21.3% y-y) in 1Q22, confirming that both its market share and transaction value for overseas clients (around W920bn, +19.5% y-y in 1Q22) are steadily expanding.
We attribute the slight shortfall in OP compared to our projection to: 1) GPM slippage due to an expansion in the firm’s portion of large-scale clients; 2) incentive payments (around W1.4bn), and 3) proactive cost execution related to negotiations with credit card companies (regarding commissions), which are all considered to be one-off factors.
Steady growth play requiring change of perspective
With the arrival of the endemic phase, transaction value from global OTA clients such as Expedia is recovering quickly, and online duty-free transaction value is climbing as well. Earnings growth is expected to continue throughout the post-Covid-19 era on the back of an influx of new overseas clients and the emergence of diverse online business models.
Adjusting our earnings estimates, we forecast 2022 sales of W899.1bn (+20.6% y-y) and OP of W50.2bn (+16.2% y-y; OPM of 5.6%). Impacted by concerns over slowing growth in the online shopping market and the downturn of the stock market, NHN KCP shares are now trading at a 2022E P/E of 17.7x, similar to the pre-pandemic level. Rather than worrying about additional de-rating, we advise investors to change their perspective, anticipating steady growth even in the post-Covid-19 era.