LG Uplus Eyes Stronger Q3 Results on Retirement Package and AIDC Effects
TECHWORLD ·
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iM Securities forecast LG Uplus's third-quarter consolidated revenue at KRW 3.8081 trillion and operating profit at KRW 315.4 billion.
That would mean revenue down 5.1% from a year earlier and operating profit up 95%, with the increase in operating profit reflecting the base effect of roughly KRW 150 billion in retirement package costs in the third quarter last year.
AIDC business expansion and cost efficiency were cited as earnings improvement factors, while Paju AIDC was said to have completed a contract with a single large customer, have early contracts under way for subsequent buildings, target completion in 2028 for Buildings 2 and 3, and possibly break ground on Building 4 in 2027.
The three major domestic mobile carriers are expanding AIDC businesses to secure new growth engines amid slowing growth in their existing telecom businesses. Against this backdrop, LG Uplus is forecast to see a sharp increase in operating profit in the third quarter. On the 20th, iM Securities cited the base effect from retirement package costs, AIDC business growth, and cost efficiency as factors improving LG Uplus's earnings.
iM Securities projected LG Uplus's consolidated revenue for the third quarter this year at KRW 3.8081 trillion and consolidated operating profit at KRW 315.4 billion. That would represent a 5.1% decline in revenue from a year earlier and a 95% increase in operating profit. The jump in operating profit was analyzed as reflecting the roughly KRW 150 billion in retirement package costs incurred in the third quarter last year.
By contrast, its existing wired and wireless telecom businesses are expected to slow. In the wired and wireless telecom segment, a base effect from subscriber inflows tied to a competitor's security incident last year is being reflected as a variable, and mobile revenue is expected to decline. The smart home segment is also expected to slow, with revenue forecast at KRW 662.1 billion, down 1.7% from a year earlier. IPTV business weakness was cited as a factor behind the soft smart home performance.
As the annual impact of slowing growth in the existing businesses is expected to be reflected in results, iM Securities forecast LG Uplus's full-year revenue this year at KRW 15.2274 trillion, down 1.5% from a year earlier. Operating profit, meanwhile, is projected at KRW 1.1709 trillion, up 31% from a year earlier. The forecast reflects the view that, despite slower growth in the existing telecom business, expansion in the AIDC business and cost efficiency will support profitability improvement.
LG Uplus is also accelerating the expansion of its AIDC business. AIDC revenue in the third quarter this year was estimated at KRW 126 billion, up about 22% from a year earlier. Fourth-quarter AIDC revenue was forecast at KRW 490.4 billion, with higher utilization at the Pyeongchon and Gasan data centers cited as growth factors.
Paju AIDC is LG Uplus's flagship AIDC project, with a target period of 30 years. Building 1 of Paju AIDC has completed a contract with a single large customer, and early contracting is under way for the subsequent buildings. Buildings 2 and 3 of Paju AIDC are being pursued with a completion target of 2028, while Building 4 is being discussed as potentially breaking ground in 2027, earlier than originally planned.
Once ramp-up is completed across the four Paju AIDC buildings, the data center's external scale is expected to expand. Profitability is also expected to improve, and as a result, the data center's contribution to companywide operating profit is projected to rise to around 20%.
Shin Hee-cheol, a researcher at iM Securities, said that assuming slower growth in the wireless telecom business, companywide cost efficiency and growth in the B2B business centered on Paju AIDC are the drivers that will improve earnings profitability, adding that cost efficiency and B2B growth will lead to improved profitability.
Source: TECHWORLD · Kim Hye-jin
Original: https://www.epnc.co.kr/news/articleView.html?idxno=408478
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Source: TECHWORLD
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