KT Earnings: Underlying Profit Slightly Ahead of Expectations; Raising Fair Value to USD 19.20

We increase our fair value estimate for KT to USD 19.20 per ADR from USD 18 previously, following a first-quarter 2024 result that was slightly ahead of our estimates on an underlying basis. First-quarter revenue increased by 3.3% year on year and reported operating income increased by 4.2% year on year. This was supported by solid growth from the core telecom businesses with wireless revenue up 1.7%, broadband up 2.1%, and media up 2.3%, all year on year. KT initiated quarterly dividends of KRW 500, announced with the first-quarter result. Our forecasts incorporate consolidated operating earnings declining at around 1% per year on average over the next 5 year, but despite this the stock trades at a price/fair value of around 0.7 times and we believe it is undervalued. We think that the stronger revenue and earnings growth may provide catalysts for share price improvement. At the current price, KT trades on a P/E ratio of 8.7 times and a dividend yield of 5.8%, which we believe is attractive compared with many international telecom services companies trading at midteen P/E multiples.