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On Friday, LG Uplus Corp (KS:032640:KS) received an upgrade from Nomura/Instinet, shifting its stock rating from Neutral to Buy and increasing its price target from KRW10,000 to KRW15,000. The adjustment by Nomura/Instinet comes as a result of several key factors, including revised earnings estimates, anticipated market valuation expansion, and a reduction in the number of shares.
Analysts at Nomura/Instinet have raised their earnings per share (EPS) forecasts for LG Uplus for the fiscal years 2025 and 2026 by 8% and 3%, respectively. This change reflects the company’s intensified focus on profitability and cost efficiency improvements. The upgrade also takes into account LG Uplus’s strategic initiatives aimed at enhancing shareholder returns, such as the planned cancellation of treasury shares, which represent 1.6% of the total shares outstanding.
The valuation of LG Uplus is expected to align with that of KT Corp (NYSE:KT) (030200 KS), with a target price-to-earnings (P/E) ratio of 10x, an increase from the previous 8x. This adjustment is justified by LG Uplus’s commitment to shareholder value and its efforts to optimize underperforming assets. These moves are seen as mirroring the successful transformation undertaken by KT over the past year.
Furthermore, with KT Corp’s foreign ownership already reaching its regulatory cap of 49%, Nomura/Instinet anticipates that investor demand will likely shift towards LG Uplus. This anticipated shift is expected to contribute to the expansion of LG Uplus’s market valuation.
The planned share count for 2025 has also been revised downwards by Nomura/Instinet, factoring in the company’s intention to cancel a portion of its shares. In addition to the core telecommunications business, LG Uplus is seen to have potential growth opportunities in its data center co-location business, particularly with the expected launch of the 50MW Paju Data Center in 2027.
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