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On Wednesday, UBS initiated coverage on LG Uplus Corp (KS:032640:KS), assigning the stock a Neutral rating and setting a price target of KRW11,000. The new rating takes into account the company’s lower return on equity (ROE) and the limited visibility of its artificial intelligence (AI) initiatives compared to competitors.
LG Uplus has been actively pushing into AI technology, but according to UBS, the company has yet to show meaningful results, especially when compared to SK Telecom (NYSE:SKM)’s AI platform ’A.I.Dor’ or KT (NYSE:KT)’s collaboration with Microsoft (NASDAQ:MSFT). The telecom company’s stock is currently trading at an estimated 2.8 times its 2026 expected enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA), which UBS believes is a fair valuation given LG Uplus’s low ROE and absence of significant AI catalysts.
UBS pointed out potential upsides for LG Uplus, which could stem from more detailed disclosures on future share buybacks. The buybacks could reach up to 20% of net profit, potentially yielding a total return of 6.5% to 7.2%, based on UBS’s expectations of a payout around 50%, and a 40% dividend payout ratio, compared to the forecasted 52% in 2025/26.
Conversely, the firm also highlighted risks that could impact the stock negatively, including the possibility of weaker-than-expected operating profit growth and a continued lower ROE. These factors could pose downside risks to the current stock valuation and future performance of LG Uplus.
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