On Thursday, Goldman Sachs (NYSE:GS) adjusted its stance on shares of KT (NYSE:KT) Corp. (030200:KS) (NYSE: KT), shifting the rating from Buy to Neutral. The firm maintained a price target for the South Korean telecommunications giant at 39,000 South Korean won (KRW).
The revision comes amid expectations of stagnant revenue growth in KT Corp .'s traditional telecom operations, as well as its BC Card and content subsidiaries. However, the analyst at Goldman Sachs anticipates stronger performance trends in the artificial intelligence and new business segments.
Despite the forecast of disciplined key cost items, with labor and marketing costs projected to decrease by 2% year-over-year, the analyst predicts a slight year-over-year decline in consolidated operating profit (OP). This anticipated decrease is attributed to challenging comparisons with the robust operating profit contributions from non-telecom subsidiaries in the second quarter of 2023.
Goldman Sachs has fine-tuned its estimates for KT Corp., resulting in minor revisions to the company's EBITDA projections for the years 2024, 2025, and 2026. These adjustments are -0.2%, +0.1%, and -0.4% respectively, leading to an unchanged price target of KRW 39,000.
The analyst's comments reflect a cautious outlook for KT Corp.'s near-term financial performance, influenced by various factors within and outside the traditional telecom sector.
In other recent news, KT Corp reported a positive growth in its Q1 2024 earnings, with consolidated revenue reaching KRW 6,654.6 billion and separate basis revenue of KRW 4,694.8 billion, indicating an increase from the previous year.
The company's operating profits also experienced a rise, with separate basis operating profit up 1.5% year-over-year to KRW 393.8 billion and consolidated operating profit growing 4.2% YoY to KRW 506.5 billion. In addition, KT Corp declared a cash dividend of KRW 501 per share for Q1, marking the company's first quarterly dividend.
In recent developments, KT Corp decided to cancel a 2% treasury share, which JPMorgan (NYSE:JPM) views as an indicator of a forthcoming shareholder-return-friendly policy under the new CEO.
JPMorgan, maintaining its Overweight rating on shares of KT Corp, raised the price target to KRW44,000 from KRW42,000, attributing its positive outlook to the company's performance. The firm anticipates considerable upside potential for total shareholder return in 2025, based on a substantial one-time parent profit from property development.
Furthermore, the company has announced its focus on becoming an AI-driven digital transformation company, aiming to strengthen core competitiveness and explore new business opportunities. This AI-driven strategy is expected to develop solutions for CRMs, ERPs, and SCMs across various industries. These recent developments highlight KT Corp's commitment to innovation and shareholder value.
InvestingPro Insights
As KT Corp. navigates through a period of muted revenue growth in its core telecom business, the InvestingPro data highlights some key financial metrics that could be of interest to investors. With a market capitalization of $6.41 billion and a compelling price-to-earnings (P/E) ratio of 8.28, KT Corp. appears to be trading at an attractive earnings multiple. This is further underscored by an adjusted P/E ratio for the last twelve months as of Q1 2024, which stands even lower at 7.56.
Investors may also find the price to book ratio of 0.54 for the same period noteworthy, suggesting that the company's stock is potentially undervalued compared to its book value. Furthermore, KT Corp. offers a generous dividend yield of 5.62%, which could be appealing for income-seeking shareholders. This is coupled with a robust dividend growth of 21.87% in the last twelve months as of Q1 2024, reflecting the company's commitment to returning value to its shareholders.
For those considering a deeper dive into KT Corp.'s investment potential, two InvestingPro Tips offer additional insights. Firstly, the company has been recognized for its high shareholder yield, a factor that combines dividends and share buybacks, indicating a proactive approach to enhancing shareholder value. Secondly, KT Corp. is identified as a prominent player in the Diversified Telecommunication Services industry, which may provide a stable footing in a competitive market landscape.
To access a complete set of InvestingPro Tips, which includes additional insights such as management's share buyback strategy and analysts' earnings revisions, investors can visit Investing.com/pro/KT. Moreover, for a limited time, use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, unlocking further valuable investment information.
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