“High growth with AIDC” ... LG Uplus Corp. price target raised

[Financial News] IBK Investment & Securities maintained its “Buy” rating on LG Uplus Corp., citing expected improvements in the profitability of its core telecom business and expansion of its artificial intelligence (AI) data center business. It raised its price target by 10%, from 20,000 won to 22,000 won. The upside from the previous day's closing price of 15,510 won is 41.8%.
On the 5th, IBK Investment & Securities analyst Kim Tae-hyun said, “Operating profit improved substantially thanks to a base effect from one-off labor costs booked in the third quarter of last year and cost efficiencies, including lower costs.” He added, “The earnings improvement is expected to continue in the fourth quarter, supported by a more efficient business structure.”
LG Uplus Corp.'s consolidated revenue in the third quarter of this year was 3.9813 trillion won, down 0.7% from a year earlier, while operating profit rose 84.1% to 297.6 billion won. Operating profit was broadly in line with the market estimate of 300.5 billion won. Net income increased 272.8% to 183.1 billion won.
Growth in the enterprise infrastructure segment also continued. Revenue from enterprise infrastructure in the third quarter rose 10.4% year on year to 472.2 billion won. AI data center revenue increased 27.7%, driven by the expansion of colocation, which provides space and power, and design, build and operate (DBO) projects.
The Paju AI data center, with a total capacity of 200 MW, is scheduled to open in stages, with all four buildings coming online by 2028. The company has secured customers for the first building, which is under construction with completion targeted for June next year. Customer demand has also been confirmed for the remaining three buildings.
Analyst Kim said, “We are also pursuing two to three DBO projects, which is increasing our visibility for medium- to long-term growth.” He forecast, “Next year, growth momentum from stronger profitability in the core telecom business and expansion of the AI data center business will come further into focus.”
However, he expects the burden from increased investment to continue for the time being. Capital expenditure (CAPEX) on a standalone basis in the third quarter was 569.8 billion won, up 30.1% year on year and 19.2% from the previous quarter.
He said, “The increased investment in AI infrastructure and dedicated 5G networks is expected to make the CAPEX burden unavoidable for the time being.” However, he added, “Over the medium to long term, expansion of the AI data center business is expected to offset the limited growth and profitability of the core telecom business.” 


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