Cocoa: The platform offers plenty of room for further growth

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The author is an analyst with NH Investment & Securities. He can be reached at jaemin.ahn@nhqv.com. – Ed.

Despite some regulatory concerns in the platform industry, we expect Cocoa to see brisk earnings growth in 2022, and we find that earnings in its key businesses continue to grow rapidly. We are positive about Cocoa’s efforts to both overcome domestic market constraints and actively target foreign markets.

Influence of platform reinforcement; target the global market now

– We keep a buy rating and a TP of 180,000 W for cocoa. Cocoa’s key businesses (advertising, commerce, mobility, payment and gaming) are successfully maintaining the competitiveness of its platform and continuing to generate revenue growth. We particularly value the following facts positively: 1) The company’s Webtoon platform is beginning to expand overseas (including in the US, France and Thailand); and 2) its games business (Kakao Games) is also targeting overseas markets and plans to develop a non-fungible token (NFT) business.

– With continued solid profits in its core areas, Cocoa total sales and operations should remain on a solid growth path for the next year – we see F 7.59 trillion sales in 2022 (+ 24.8% yy) and an OP of 1.23 trillion W (+.). 73.0% per year).

– However, some potential regulatory issues related to the platform industry could emerge lately in the presidential candidates’ election pledges.

3Q21 review: revenues are arriving slowly

– Cocoa posted consolidated sales of W 1.74 billion (+ 58.2% yy, + 28.7% qq) and an OP of W168.2 billion (+ 39.9% yy, + 3.4% qq), with OP both our estimate of W 229.4 billion and. missed consensus of W221.6 billion Despite the stellar success of Kakao Games’ new title Odin: Valhalla Rising (which led the company’s game revenue growth), Kakao’s OP fell short of expectations due to higher labor, outsourcing / infrastructure and marketing costs return. However, we expect a tailwind to earnings growth for Cocoa in Q4 21 as: 1) its advertising and retail divisions both enter peak seasons; 2) its media business consists of booking sales for several new releases (e.g. The Match (with Lee Byung-hun), Hunt (directed by Lee Jung-jae), Toy Soldiers: Fake Men 2 and Fight Club); and 3) Webtoon global sales of Cocoa Webtoon and Piccoma will continue to grow.

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