Kakao (035720.KS): 2Q OP beat, driven by Pay biz / Talk biz

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06 Aug 2026 14:02:34 ET │ 14 pages

Kakao (035720.KS)

2Q OP beat, driven by Pay biz / Talk biz

CITI'S TAKE

Kakao delivered above consensus OP in 2Q, driven by Pay biz / Talk biz.

While we raise FY27/28 NP estimates by 12%/12%, we lower our 12-m TP to

W48,000.

2Q OP beat — Kakao reported W2.1tr revenue & W277bn OP in 2Q26, OP coming in

at 21% above consensus. We attribute solid 2Q OP to: 1) +14% y/y advertising &

subscription revenue growth (driven by business messaging revenue growth of +20%

y/y & Talk DA revenue growth of +28% y/y); 2) +10% y/y commerce revenue growth

(driven by total commerce GMV growth of +9% y/y); and 3) sharp OP growth at Pay

biz.

Confident in delivering 2026 OPM guidance — Kakao remained confident in

delivering its 2026 OPM guidance of above 10% amid likely continuous OPM

improvement in 2H26 (driven by benefit from non-core biz downsizing/reshuffling,

along with continuous solid top-line growth at platform biz). We currently forecast

Kakao to record 11.9% OPM in 2026.

Constructive comments on long-term outlook — Despite continuous OP

headwind from AI service, parent base OPM expanded to 17.7% in 2Q26 from 16.5%

in 2Q25. Kakao sees its parent base OPM surpassing 20%-level by 2028, which

looks doable in our view (where we estimate parent base OPM of 21.5% by 2028).

n

Buy

Price (06 Aug 26 15:45)

Target price

from W54,000

Expected share price

return

Expected dividend yield

Expected total return

Market Cap

Lowering TP — While we lower FY26 NP estimate by 58% (mainly reflecting one-off

loss from discontinued operations & income tax expense related to deconsolidation

/ subsidiary disposals), we raise FY27/28 NP estimates by 12%/12% (reflecting more

constructive non-operating item assumptions, along with higher parent base OPM

assumptions). That said, we lower our 12-m TP to W48,000 to reflect lower stake

value in listed/unlisted assets.

Paul Hwang AC

Year to

Net Profit

Diluted EPS

EPS growth

31 Dec

(WB)

(W)

(%)

2024A

106

240

110.5

2025A

460

1,041

334.2

2026E

254

575

2027E

775

1,755

2028E

907

2,053

17.0

P/E

P/B

ROE

(x)

(%)

159.8

1.7

1.1

0.2

36.8

1.5

4.3

0.2

-44.7

66.6

1.5

2.2

0.2

205.0

21.8

1.4

6.5

0.4

18.7

1.3

7.2

0.5

25.3%

0.2%

25.5%

…