On Thursday, Goldman Sachs (NYSE:GS) adjusted its stock price target for LG Uplus Corp (032640:KS), a South Korean telecommunications firm, increasing it slightly from KRW11,400 to KWR11,500. The investment firm has maintained a Neutral rating on the company's shares. The revision reflects a nuanced perspective on LG Uplus's financial outlook, considering recent quarterly results and extending valuation forecasts.
The Goldman Sachs analyst anticipates that LG Uplus will experience subdued revenue growth in its traditional telecommunications operations, such as wireless services and broadband/IPTV. Still, the Enterprise segment is expected to maintain stronger performance trends, contributing to an overall service revenue growth. This growth is projected to align with the company's guidance, with a year-over-year increase of 2% for the first half of 2024.
Despite the anticipated service revenue uptick, LG Uplus is projected to face challenges due to increased fixed costs, including labor and depreciation & amortization (D&A) expenses. These costs are expected to lead to a 16% year-over-year decline in operating profit.
Goldman Sachs has fine-tuned its earnings estimates for LG Uplus, primarily based on the company's performance in the first quarter of 2024. Additionally, the firm has introduced earnings estimates for the year 2026. The new stock price target is derived from averaging the projected valuations for 2024 and 2025, a methodological shift from the previous valuation that was based solely on 2024.
The report concludes with the refreshed price target of KRW11,500 and reiterates a Neutral stance on LG Uplus, signaling a cautious but not pessimistic outlook on the stock's potential performance.
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