Kakao (035720)

Robust Growth Across All Divisions Continues

Danny Lee Yonghyun Choi Internet & Games / Media Research Associate May 7, 2021 +82-2-6114-2960 [email protected] +82-2-6114-2915 [email protected]

Maintain BUY; Revise up TP by 4.7% We maintain BUY on Kakao as we lift our TP by 4.7% to KRW135,000. While our revenue to KRW135,000 and OP forecasts have been left largely unchanged, we have revised up 2021E and 2022E NP (attributable to controlling interests) by 19.2% and 2.3%, respectively, to reflect the expected increase in equity-method gains from Dunamu. We expect the volatility in equity-method gains to fade from 2022.

1Q21 OP in line with consensus; Kakao reported 1Q21 revenue of KRW1.26tn (+44.9% YoY, +1.8% QoQ) and OP of Equity-method gains related to KRW157.5bn (+78.6% YoY, +5.3% QoQ). OP was in line with our estimate as well as market Dunamu increased consensus. Key businesses—including Talk Biz (+51.4% YoY), new businesses (+88.9% YoY), and paid content (+80.0% YoY)—catalyzed revenue growth. OPM (12.5%, +0.4pp QoQ) continued trending up on narrowing losses at new businesses (i.e., KakaoPay, mobility). Meanwhile, NP (attributable to controlling interests) skyrocketed 189.9% YoY to KRW224.5bn thanks to higher equity-method gains from Dunamu upon the growth in cryptocurrency trading value.

Strong growth continues, driven by For 2021, Talk Biz revenue is expected to increase 50.4% YoY as both ad and commerce Talk Biz should continue to serve as major cash cows. In the ad segment, BizBoard customers are increasingly using add-on services (e.g., Kakao Talk Channel, Notification Talk, Talk Store), fueling a virtuous cycle in which synergies among the various services expand. In the commerce segment, along with category expansion, transaction value is growing across all categories (e.g., Kakao Talk Gift, Talk Store, Shopping Live).

Buy Maintain Trading Data Risk & Total Return (annualized over three years) Free float 72.9% Target Price (Raised) KRW135,000

Avg. T/O val. (3m, KRWbn) 379.9 Return 1 2 3 4 High5 Risk Dividend yield* 0.6% Foreign ownership 33.3% 1 FALSE FALSE FALSE FALSE TRUE Major shareholders Bum-Soo Kim and 63 others 24.3% Total return 18.0% 2 FALSE FALSE FALSE FALSE FALSE Current price (May 6) KRW115,000 National Pension Service 8.4% 3 FALSE FALSE FALSE FALSE FALSE Consensus target price KRW125,304 Stock Price Performance

4High FALSE FALSE FALSE FALSE FALSE Market capitalization USD45.3bn (%) 1M 3M 6M 12M 5 FALSE FALSE FALSE FALSE FALSE * 12-month forward Absolute 5.7 26.4 55.2 188.2

Relative 4.0 24.1 18.0 74.9

Earnings Forecast & Valuation Stock Price & Relative Performance Fiscal year-end 2020A 2021E 2022E 2023E Revenue (KRWbn) 4,157 5,527 6,793 7,812 Relative performance (LHS) Stock price (RHS) OP (KRWbn) 456 754 1,117 1,569 % KRW NP to control. int. (KRWbn) 156 672 847 1,204 100 132,000 EPS (KRW) 355 1,514 1,909 2,713 80 EPS growth (%) TTB 326.5 26.1 42.1 98,000 P/E (x) 219.3 75.9 60.2 42.4 60

EV/EBITDA (x) 45.4 47.3 34.6 25.7 40 64,000 P/B (x) N/A 7.3 6.8 6.2 20 ROE (%) 2.7 10.1 11.7 15.3 Div. yield (%) 0.0 0.6 0.9 1.3 0 30,000 May '20 Aug '20 Nov '20 Feb '21 May '21

Source(s): Company data, KB Securities

Investments in new-growth Kakao’s aggressive investments in a broad range of businesses—including paid businesses bearing fruit content, fintech, entertainment, and mobility—are beginning to bear fruit. A number of subsidiaries are preparing for IPOs in 2021-2022 and Kakao’s core business (i.e., KakaoTalk) should also see growth in earnings accelerate—giving way to both earnings growth and momentum for the company.

Investment Opinion & Risks

Bull-case Scenario KRW162,000 (107.0x 12m fwd P/E) Base-case scenario: Catalysts 1) Talk Biz revenue grows 50% in 2021

2) New businesses break even in 2021

Base-case Scenario (target price) KRW135,000 (89.0x 12m fwd P/E)

Bull-case scenario: Upside risks 1) Talk Biz revenue grows 60% in 2021 Current price KRW115,000 2) New businesses are profitable in 2021

Bear-case scenario: Downside risks Bear-case Scenario KRW108,000 (71.0x 12m fwd P/E) 1) Talk Biz revenue grows 40% in 2021 2) New businesses post losses in 2021

Revised Earnings Estimates Valuation & Target Price Calculation

(KRWbn, %) Previous Revised Change 2021E 2022E 2021E 2022E 2021E 2022E 1) Valuation method: DCF valuation Revenue 5,575.2 6,869.4 5,527.4 6,792.8 -0.9 -1.1

OP 760.0 1,149.4 754.3 1,117.4 -0.7 -2.8 2) Target price calculation: NP (to control. int.) 563.9 828.0 672.1 847.2 19.2 2.3 Target market cap of KRW58.1tn Source(s): KB Securities estimates

3) Target price range: KB Estimates vs. Consensus KRW108,000 – KRW162,000 (KRWbn, %) KB Estimates Consensus Difference 2021E 2022E 2021E 2022E 2021E 2022E 4) Valuation at target price: 89x 12m fwd P/E

Revenue 5,527.4 6,792.8 5,588.1 6,848.4 -1.1 -0.8 OP 754.3 1,117.4 784.0 1,137.1 -3.8 -1.7 NP (to control. int.) 672.1 847.2 597.0 852.5 12.6 -0.6

Source(s): Quantiwise, KB Securities estimates

Revenue Composition (2021E) Earnings Sensitivity Analysis (%) EPS change 2021E 2022E +1% in FX rate +0.4 +0.4 +1pp in interest rate +1.2 +1.2

45% Platform

Content 55%

Source(s): Company data, KB Securities estimates

Peer Group Comparison

(KRWbn, x, %) Market Cap. 12m fwd P/E 5y EPS CAGR 12m fwd P/B 12m fwd EV/EBITDA 5y EBITDA CAGR Kakao 51,038.1 66.7 16.4 7.2 34.1 34.4 Naver 59,381.2 7.7 8.9 3.1 26.7 13.3 Facebook 1,004,417.2 21.3 50.9 5.2 11.6 38.0 Alphabet 1,760,714.9 23.8 17.6 5.8 13.9 18.5

Source(s): Bloomberg Consensus, KB Securities

Table 1. 1Q20 Earnings Results (KRWbn, %, pp) 1Q21P 4Q20 QoQ 1Q20 YoY KB Estimates Diff. Consensus Diff. Revenue 1,258.0 1,235.1 1.8 868.4 44.9 1,244.0 1.1 1,242.6 1.2 OP 157.5 149.7 5.3 88.2 78.6 163.2 (3.5) 153.8 2.4 Margin 12.5 12.1 0.4 10.2 2.4 13.1 (0.6) 12.4 0.1 NP (to control. int) 224.5 (189.1) TTB 77.5 189.9 123.5 81.8 134.8 66.6 Margin 17.8 (15.3) 33.2 8.9 8.9 9.9 7.9 10.8 7.0

Source(s): Quantiwise, KB Securities estimates Note: TTB=turn to black, TTR=turn to red, RR=remain in red

Table 2. Earnings Forecast (consolidated) (KRWbn) 1Q20 2Q20 3Q20 4Q20 1Q21P 2Q21E 3Q21E 4Q21E 2019 2020 2021E 2022E Revenue 868.4 952.9 1,100.4 1,235.1 1,258.0 1,322.5 1,405.6 1,541.4 3,070.1 4,156.8 5,527.4 6,792.8 (% YoY) 22.9 30.0 40.5 45.7 44.9 38.8 27.7 24.8 27.0 35.4 33.0 22.9 (% QoQ ) 2.5 9.7 15.5 12.2 1.8 5.1 6.3 9.7 - - - - Platform 441.8 492.7 554.4 650.5 668.8 733.0 767.9 872.1 1,434.7 2,139.4 3,041.9 3,906.0 (% YoY) 41.1 50.7 58.1 46.5 51.4 48.8 38.5 34.1 38.0 49.1 42.2 28.4 (%QoQ) (0.5) 11.5 12.5 17.3 2.8 9.6 4.8 13.6 - - - - BizBoard 224.7 248.4 284.4 353.7 361.5 396.4 424.7 488.3 649.8 1,111.3 1,671.0 2,164.9 Portal 116.6 117.5 121.2 122.7 117.5 121.0 119.9 122.7 523.6 478.0 481.1 495.6 New business 100.5 126.8 148.8 174.0 189.8 215.6 223.2 261.1 261.3 550.2 889.7 1,245.6 Content 426.6 460.2 546.0 584.7 589.2 589.5 637.7 669.3 1,635.4 2,017.4 2,485.5 2,886.7 (% YoY) 8.5 13.3 26.3 44.9 38.1 28.1 16.8 14.5 18.7 23.4 23.2 16.1 (%QoQ) 5.7 7.9 18.7 7.1 0.8 0.1 8.2 5.0 - - - - Game 96.8 107.5 150.4 140.8 130.3 137.0 157.0 142.6 397.4 495.5 566.9 687.5 Music 150.7 151.0 155.7 161.7 156.8 158.6 163.5 169.8 586.6 619.2 648.7 681.2 Paid 97.0 119.0 148.4 163.6 174.7 186.4 198.1 208.6 297.2 528.0 767.8 940.7 IP & other 81.9 82.7 91.5 118.6 127.4 107.5 119.0 148.2 354.1 374.7 502.1 577.4 OPEX 780.2 855.1 980.2 1,085.5 1,100.4 1,138.6 1,203.2 1,330.8 2,863.3 3,701.0 4,773.1 5,675.4 (YoY %) 15.0 23.5 35.4 41.3 41.0 33.2 22.7 22.6 22.2 29.3 29.0 18.9 (QoQ %) 1.6 9.6 14.6 10.7 1.4 3.5 5.7 10.6 - - - - Labor 198.7 216.5 239.3 265.7 292.9 266.8 290.9 304.1 701.5 920.2 1,154.7 1,287.4 Marketing 29.9 38.5 76.3 87.5 67.2 99.2 105.4 123.3 151.2 232.3 395.1 475.5 D&A 58.7 61.6 66.8 78.2 79.2 83.2 88.4 95.4 220.6 265.3 346.2 420.6 Other 19.1 22.3 20.3 17.4 23.6 24.8 25.0 27.4 61.8 79.1 100.8 120.7 OP 88.2 97.8 120.2 149.7 157.5 183.8 202.4 210.6 206.8 455.9 754.3 1,117.4 (YoY %) 218.9 141.7 103.5 88.1 78.6 88.0 68.3 40.7 183.5 120.4 65.5 48.1 (QoQ %) 10.8 10.8 23.0 24.5 5.3 16.7 10.1 4.1 - - - - Margin (%) 10.2 10.3 10.9 12.1 12.5 13.9 14.4 13.7 6.7 11.0 13.6 16.4 NP (to control. int.) 77.5 139.8 127.5 (189.1) 224.5 166.3 147.9 133.3 (301.0) 155.6 672.1 847.2 (YoY %) 181.6 260.4 128.9 TTB 189.9 19.0 16.0 TTB TTR TTB 331.9 26.1 (QoQ %) (118.3) 80.4 (8.8) (248.3) (218.7) (25.9) (11.1) (9.9) - - - - Margin (%) 8.9 14.7 11.6 (15.3) 17.8 12.6 10.5 8.6 (9.8) 3.7 12.2 12.5

Source(s): Company data, KB Securities estimates Note: TTB=turn to black, TTR=turn to red, RR=remain in red

Table 3. Earnings Estimate Revisions 2021E 2022E (KRWbn, %, pp) Revised Previous Change Cons. Diff. Revised Previous Change Cons. Diff. Revenue 5,527.4 5,575.2 (0.9) 5,588.1 (1.1) 6,792.8 6,869.4 (1.1) 6,848.4 (0.8) OP 754.3 760.0 (0.7) 784.0 (3.8) 1,117.4 1,149.4 (2.8) 1,137.1 (1.7) Margin 13.6 13.6 0.0 14.0 (0.4) 16.4 16.7 (0.3) 16.6 (0.2) NP (to control. int.) 672.1 563.9 19.2 597.0 12.6 847.2 828.0 2.3 852.5 (0.6) Margin 12.2 10.1 2.0 10.7 1.5 12.5 12.1 0.4 12.4 0.0

Source(s): Quantiwise, KB Securities estimates

TTable 4. TP Calculation: DCF Model (KRWbn, %, ’000 shares, KRW) 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E 2031E Cash flow projection Adj. FCF 592.3 732.8 1,019.1 1,355.0 1,759.1 2,190.7 2,626.1 3,076.9 3,536.4 4,007.7 FCFF 517.4 732.8 1,019.1 1,355.0 1,759.1 2,190.7 2,626.1 3,076.9 3,536.4 4,007.7 4,496.7 NOPLAT 507.3 772.0 1,119.3 1,511.1 1,964.5 2,455.6 2,946.7 3,447.6 3,964.8 4,480.2 5,017.8 (+) Depreciation & amortization 275.1 272.6 269.5 266.9 265.2 265.2 270.5 275.9 281.4 287.1 292.8 (+/-) Changes in working capital -182 -220 -330 -429 -514.5 -617.4 -741 -852 -980 -1077.9 -1185.7 (-) Capital expenditure -204.0 -212.0 -220.2 -228.5 -237.1 -250.0 -255.0 -260.1 -265.3 -270.6 -276.0 (-) Others 121.4 120.1 180.2 234.3 281.1 337.4 404.8 465.6 535.4 588.9 647.8 PV of cash flow WACC 7.30 Discount 1.00 0.93 0.87 0.81 0.75 0.70 0.66 0.61 0.57 0.53 PV of cash flow 592.3 682.9 885.1 1,096.8 1,327.1 1,540.2 1,720.7 1,878.9 2,012.6 2,125.6 Terminal growth 2.1 30y KTB yield Terminal value 78,684.8 2031E FCFF / (WACC – TGR) PV of terminal value 41,733.3 7.30% WACC (0.67% risk-free rate; 7.37% market risk premium) Valuation EV 55,595.5 (-) Net debt (376.0) Net cash (+) Long term marketable securities 702.6 End-4Q20 (+) Investments in associates 1,504.4 End-4Q20 (-) Non-controlling interest 46.0 Fair EV 58,132 No. of shares 431,425 Target price 135,000 Current price 115,000 May 6, 2021 Upside 17.4

Source(s): KB Securities estimates

Table 5. TP Sensitivity to WACC and TGR (KRW) Terminal Growth Rate (%) 1.3 1.5 1.7 1.9 2.1 2.3 2.5 2.7 2.9 6.70 136,243 140,181 144,434 149,041 154,048 159,511 165,494 172,076 179,350 6.90 130,858 134,460 138,339 142,529 147,067 152,001 157,382 163,276 169,760 7.10 125,853 129,157 132,706 136,528 140,655 145,126 149,986 155,288 161,095 WACC (%) 7.30 121,191 124,229 127,484 130,980 134,745 138,811 143,216 148,004 153,228 7.50 116,838 119,638 122,631 125,838 129,282 132,992 136,998 141,338 146,055 7.70 112,765 115,351 118,110 121,059 124,218 127,612 131,266 135,213 139,489 7.90 108,946 111,340 113,888 116,606 119,511 122,624 125,968 129,569 133,457

Source(s): Quantiwise, KB Securities estimates

Table 6. WACC Revision

(KRWbn, %) Previous Revised Notes COE (A) = a + b x c 7.31 7.30 Risk-free rate (a) 0.68 0.67 Avg. 1y MSB yield (last 3 months) Adj. beta (b) 0.90 0.90 Adj. beta

Risk premium (c = d - e) 7.37 7.37 Market (d) 10.97 10.97 2001-20 annual avg. WMI500 total return Risk-free rate (e) 3.61 3.61 2001-20 avg. 1y MSB yield COD (B) 0.89 0.89 YTD yield of 1y KRW-based bonds Debt -376 Net debt

Weight of equity value (f) 100.00 100.00 Weight of debt (g) 0.00 0.00 WACC (C) = (A x f) + (B x g) 7.31 7.30

Source: KB Securities estimates

Fig 1. Kakao Revenue & OPM Fig 2. KakaoPay GMV

Platform revenue (L) KakaoPay GMV (L) YoY (R) (KRWbn) Content revenue (L) (%) (KRWtn) (%) OPM (R) 1,800 16 25 1,200 1,600 14 1,000 1,400 12 20 1,200 10 800 1,000 15 8 800 600 6 600 10 400 4 400 200 2 5 200 0 0 1Q20 2Q20 3Q20 4Q20 1Q21P 2Q21E 3Q21E 4Q21E 0 0 17.3 17.9 18.3 18.9 19.3 19.9 20.3 20.9 21.3

Source(s): Company data, KB Securities estimates Source(s): Company data, KB Securities

Fig 3. Paid Content GMV Fig 4. Equity-Method Gains Related to Dunamu

(KRWbn) (KRWbn) KakaoPage GMV Piccoma GMV 8.5 9 160 8 7.0 140 7 120 6 5.0 100 5 4 80 3 60 2 40 1 20 0 -1 0 -0.4 1Q20 2Q20 3Q20 4Q20 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21

Source(s): Company data, KB Securities Source(s): Company data, KB Securities

Fig 5. New Business Revenue Fig 6. TalkBoard Revenue

New business revenue (L) YoY (R) TalkBoard revenue (L) YoY (R) (KRWbn) (%) (KRWbn)

300 160 120 450

140 400 250 100 120 350 200 80 300 100 250 150 80 60 200 60 100 40 150 40 100 50 20 20 50 0 0 0 0 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21E 3Q21E 4Q21E 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21E 3Q21E 4Q21E

Source(s): Company data, KB Securities estimates Source(s): Company data, KB Securities estimates

Income Statement Statement of Financial Position (KRWbn) 2019A 2020A 2021E 2022E 2023E (KRWbn) 2019A 2020A 2021E 2022E 2023E (Reporting standard) (IFRS-C) (IFRS-C) (IFRS-C) (IFRS-C) (IFRS-C) (Reporting standard) (IFRS-C) (IFRS-C) (IFRS-C) (IFRS-C) (IFRS-C)

Revenue 3,070 4,157 5,527 6,793 7,812 Total assets 8,737 11,954 12,757 13,495 14,579

Cost of revenue 0 0 0 0 0 Current assets 2,830 4,463 5,228 5,912 6,927 Gross profit 3,070 4,157 5,527 6,793 7,812 Cash and cash equivalents 1,918 2,894 3,511 4,037 4,890 SG&A expenses 2,863 3,701 4,773 5,675 6,243 Current financial assets 279 834 914 994 1,074

Operating profit 207 456 754 1,117 1,569 Trade receivables 157 247 271 299 331 EBITDA 426 722 1,029 1,390 1,838 Inventory 49 46 56 66 76 Non-operating accounts -441 -42 278 176 193 Other current assets 426 441 476 516 556

Interest income 32 23 70 73 81 Non-current assets 5,908 6,987 7,026 7,079 7,148 Interest expenses 13 19 12 12 13 Investment assets 1,631 2,598 2,704 2,814 2,928 Profit on equity method -20 9 239 8 9 Property, plant and equipment 350 431 461 487 512

Net other non-operating income -440 -55 -19 106 117 Intangible assets 3,548 3,352 3,254 3,171 3,101 Profit before tax -234 414 1,032 1,293 1,762 Other non-current assets 379 607 607 607 607 Income tax expense 108 241 314 388 476 Total liabilities 2,997 4,526 4,625 4,765 4,988

Net profit -342 173 718 905 1,286 Current liabilities 2,134 2,628 2,724 2,862 3,084 NP attributable to controlling interests -301 156 672 847 1,204 Trade payables 29 38 80 160 320 Adj. net profit -301 156 672 847 1,204 Short-term financial liabilities 517 267 227 187 147

Other current liabilities 1,588 2,323 2,417 2,515 2,616 Operating Statistics & Ratios Non-current liabilities 564 1,166 1,168 1,170 1,172 (%) 2019A 2020A 2021E 2022E 2023E Non-current financial liabilities 237 683 685 687 689

Revenue growth 27.0 35.4 33.0 22.9 15.0 Other non-current liabilities 327 483 483 483 483 OP growth 183.5 120.5 65.5 48.1 40.4 Total equity 5,740 7,428 8,133 8,730 9,590

EBITDA growth 104.6 69.7 42.5 35.0 32.3 Issued capital 43 44 44 44 44 NP growth of parent TTR TTB 331.9 26.1 42.1 Share premium 5,043 5,833 5,833 5,833 5,833 GP margin 100.0 100.0 100.0 100.0 100.0 Other equity interest 7 19 19 19 19

OP margin 6.7 11.0 13.7 16.5 20.1 Accumulated other comprehensive income -16 87 87 87 87 EBITDA margin 13.9 17.4 18.6 20.5 23.5 Retained earnings 148 316 975 1,515 2,293 EBT margin -7.6 10.0 18.7 19.0 22.6 Controlling interests 5,225 6,299 6,958 7,498 8,275

NP margin of parent -9.8 3.7 12.2 12.5 15.4 Non-controlling interests 515 1,129 1,175 1,233 1,315

Statement of Cash Flows Key Ratios (KRWbn) 2019A 2020A 2021E 2022E 2023E (x, %, KRW) 2019A 2020A 2021E 2022E 2023E

Cash flow from operating activities 753 971 936 1,390 1,847 Multiples Net profit -342 173 718 905 1,286 P/E N/A 219.3 75.9 60.2 42.4

Depreciation & amortization 219 266 275 273 270 P/B 2.5 N/A 7.3 6.8 6.2

Other non-cash adjustments 476 161 75 380 467 P/S 4.2 N/A 9.2 7.5 6.5 Investments in working capital 371 183 182 220 300 EV/EBITDA 28.9 45.4 47.3 34.6 25.7

Decrease(Increase) in receivables 39 -60 -24 -28 -32 EV/EBIT 59.5 71.9 64.6 43.1 30.1 Decrease(Increase) in inventory -19 -4 -10 -10 -10 Dividend yield, ordinary (%) 0.1 0.0 0.6 0.9 1.3 Increase(Decrease) in payables 100 104 42 80 160 EPS -717 355 1,514 1,909 2,713

Investments in other working capital 250 145 174 178 182 BVPS 12,121 0 15,678 16,894 18,646 Other operating cash flow 29 187 -314 -388 -476 SPS 7,313 0 12,454 15,306 17,601 Cash flow from investing activities -414 -1,261 -388 -406 -418 DPS (annual, ordinary) 25 30 713 988 1,545

Capital expenditure -99 -169 -204 -212 -220 Cash dividends payout ratio (%) 0.0 8.3 45.8 50.3 55.4 Investments in intangibles -55 -81 -4 -4 -4 Operating performance Changes in investment assets -696 -245 -106 -110 -114 ROE -5.8 2.7 10.1 11.7 15.3

Other investment cash flow 436 -766 -74 -80 -80 ROA -4.1 1.7 5.8 6.9 9.2 Cash flow from financing activities 322 1,305 68 -457 -576 ROIC -0.2 7.3 20.4 33.0 53.0 Proceeds from (repayment of) debt -134 424 -38 -38 -38 Financial structure (%)

Changes in equity 331 79 0 0 0 Total liab./equity 52.2 60.9 56.9 54.6 52.0 Dividends paid -10 -13 -10 -41 -52 Net debt/equity Net Cash Net Cash Net Cash Net Cash Net Cash Other financing cash flow 136 815 116 -378 -485 Current ratio 1.3 1.7 1.9 2.1 2.3

Other cash flow 11 -40 0 0 0 Interest coverage (x) 16.2 24.1 62.6 95.6 122.0 Increase/decrease in cash 671 976 617 526 853 Activity ratios Cash and cash equivalents at FYE 1,918 2,894 3,511 4,037 4,890 Asset turnover (x) 0.4 0.4 0.5 0.5 0.6

Free cash flow 653 802 732 1,178 1,627 Receivables turnover (x) 17.5 20.6 21.3 23.8 24.8 Net cash flow -102 1,334 735 644 971 Payables turnover (x) 105.3 124.8 94.0 56.6 32.6 Net cash (net debt) 1,443 2,778 3,513 4,157 5,128 Inventory turnover (x) 72.0 87.3 108.8 111.7 110.3

Source(s): Company data, KB Securities estimates

Disclosures Rating and Target Price Changes (Share price ━, Target Price ━)

KRW Kakao Kakao (035720) Date R ating Target Price Differential (%) 164,000 (KRW) Av g. Max / Min 128,000 Apr-30-2019 Buy 27,600 -8.19 May-10-2019 Buy 32,800 -19.74 -7.93 92,000 Nov-08-2019 Buy 38,000 -16.66 -5.79 56,000 Feb-14-2020 Buy 44,000 -24.08 -13.41 Mar-31-2020 Buy 41,000 -16.81 -2.68 20,000 May '19 Sep '19 Jan '20 May '20 Sep '20 Jan '21 May '21 May-07-2020 Buy 48,000 -7.27 2.92 May-25-2020 Buy 57,000 4.83 30.00 Aug-10-2020 Buy 86,000 -14.14 -4.19 Nov-06-2020 Buy 90,000 -10.89 5.22 Feb-09-2021 Buy 108,000 -8.83 1.48 Apr-09-2021 Buy 129,000 -9.55 -5.81 May-07-2021 Buy 135,000

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