Mirae Asset Securities logo

Welcome signs of a pickup in traffic

2Q23 review: Platform strong, but content disappoints

For 2Q23, Kakao announced revenue of W2.04tr (+12% YoY) and operating profit of W113bn (-34% YoY). Revenue was in line with the consensus, but operating profit missed by 9%. Platform revenue was W989bn (+6% YoY), 2% above our expectation, driven by Talk Biz revenue (transaction-based/ads). Content revenue was 5% lower than our expectation, hurt by weakness in games.



Maintain Buy, but cut TP by 6%

We cut our target price on Kakao by 6% to W75,000 (target P/E of 68x), reflecting our earnings forecast revisions. We revise down our 2023 and 2024 operating profit forecasts by 11% and 13%, respectively, in light of the weakness of the games segment. While the content business somewhat disappointed in 2Q23, we think margin improvements could gain pace, depending on the speed at which the ad industry recovers in 2H23. If KakaoTalk’s traffic growth (in terms of DAUs and total time spent) continues into 2H23, we believe the stock could see renewed momentum.