Smart Factory, Smart Mobility Businesses Continue Rapid Growth
The author is an analyst of KB Securities. He can be reached at joonsop.analyst@kbfg.com. -- Ed.
Maintain BUY, target price of KRW19,000
We maintain BUY and TP of KRW19,000 for LGU based on B2B earnings visibility, benefits from the stabilizing B2C market and hope for a more favorable shareholder return policy. We see B2B earnings growth becoming a major factor heading into 2H22; Enterprise Infrastructure (e.g., IDC, Solution, Enterprise Line) generated 1Q22 revenue of KRW362.4bn (+6.7% YoY; +10.7% YoY on 2021 basis).
IDC: seller’s market should improve top-line growth
IDC posted 2021 revenue of KRW258.4bn (+13.4% YoY; 1Q22 revenue at KRW63.8bn). The total area of IDCs operated by LGU stands at ~269k m2 (71k m2 in terms of server space). The IDC market is quickly becoming a seller’s market; rising prices should fuel top-line growth.
IDC strategy focuses on securing captive clients (e.g., Google Cloud)
The second Pyeongchon data center, which rivals the capacity of the Pyeongchon mega-center, will add 40k m2 in server space once completed in 3Q23. LGU’s IDC strategy of securing captive clients seems viable. Media reports (Digital Daily, Aug 15, 2021) suggest that Google Cloud has already signed a deal for using server space equivalent to half of the second Pyeongchon center’s server space.
Smart factory, smart mobility businesses continue rapid growth
Rapid growth for Enterprise Infrastructure’s smart factory and smart mobility businesses should bolster sentiment for B2B earnings visibility. Of their 1Q22 targets, smart factory and smart mobility achieved 117% and 110%, respectively.