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Well-positioned to benefit from data center expansion

Well-positioned to benefit from data center expansion

We expect KT to benefit from Korea’s accelerating data center buildout. Because the company plans to add capacity based on actual customer demand, the risks associated with the expansion should be relatively limited. It appears to already have a pipeline of prospective customers covering around 80% of its planned 1GW of new capacity. KT is also working to secure additional business from neocloud providers and global CSPs, broadening its customer base beyond major Korean companies.

Capacity expansion underpinned by an established customer pipeline

We expect KT’s data center capacity expansion to accelerate in earnest. Its AI data center capacity stood at 152MW as of 2Q26, and the company plans to add 1GW of new capacity, bringing the total to approximately 1.1GW by 2031.

The expansion is expected to proceed in phases, with the Bucheon data center scheduled to open in 2027, the Gaebong, Gunsan, and Yongin facilities in 2028, and the Ansan facility in 2029. For the first 200MW, we expect KT to disclose the sites, power supply arrangements, and anchor tenants in stages. We estimate that the remaining 800MW will be developed in phases across around 20 sites.

Despite the scale of the planned expansion, we believe demand risk should be relatively limited, as initial customer demand has already been secured. Rather than building capacity first and then seeking customers, KT plans to add capacity progressively in line with customer demand.

We expect the revenue contribution from added data center capacity to begin ramping up in 2028, with operating leverage becoming more pronounced from 2029. For 2029, we forecast data center revenue and operating profit at W1.7tr (+66% YoY) and W129.3bn (+186% YoY), respectively. Our 2030 estimates are W2.4tr (+38% YoY) and W190.7bn (+48% YoY), respectively, implying an OP margin of 8.1%.

Maintain TP of W73,000; expectations for higher 4Q26 dividend remain intact

We maintain our target price for KT at W73,000, which is based on the combined value of the standalone business (W14.3tr) and major subsidiaries (W2.4tr). We also believe expectations for a higher 4Q26 dividend remain intact, supported by the company’s ample free cash flow.