Kakao fares better than Naver in first quarter

By Jun Ji-hye

Kakao has achieved more than expected in the first quarter of the year, while Naver's operating profit continued to fall. The conflicting results of the two prominent IT companies here came because Kakao has begun to generate profit from its new businesses, while Naver is still making aggressive investments in new businesses.

Kakao posted 706.3 billion won ($600 million) in sales and 27.7 billion won in operating profit, for the first three months of the year.

Kakao Co-CEO Yeo Min-soo

The operating profit of the operator of the nation's dominant messaging app soared 544 percent from the previous quarter and 166 percent from the same period the previous year.

Kakao's first-quarter performance was a surprise because it exceeded the expectations of local securities firms.

On the other hand, Naver, the nation's largest portal operator, posted 1.5 trillion won in sales and 206 billion won in operating profit in the first quarter. Operating profit fell 3.3 percent from the previous quarter and 19.7 percent from the same period the previous year.

Kakao has successfully expanded its profits from new businesses, including its mobility and mobile payment platforms, posting 59.8 billion won in sales there, up 172 percent from the previous year.

The firm's chauffeur service offered through Kakao T has led growth, with sales from the service increasing 68 percent from the previous year.

Kakao plans to continue boosting its mobility business with its newly launched e-bike sharing service.

Mobile payment platform Kakao Pay also achieved successful results, with a 10 trillion won turnover in the first quarter alone.

“We will continue to be able to accelerate growth this year,” Kakao co-CEO Yeo Min-soo said during a conference call, Thursday, adding that the firm's new advertising service is also expected to grow more than 50 percent this year.

Securities firms are rushing to raise their target prices for Kakao.

Naver CEO Han Seong-sook

NH Investment & Securities analyst Ahn Jae-in raised the target price for Kakao from 130,000 won to 155,000 won.

“Kakao's corporate value is expected to be improved as its subsidiaries including Kakao Mobility and Kakao Pay are making profits in earnest,” Ahn said.

Meanwhile, Naver continues to suffer from higher costs nurturing its new businesses. In particular, its Japanese subsidiary Line, which has made aggressive investments in fintech, recorded an operating loss of 102.5 billion won.

Naver also spent 403.5 billion won on R&D in the first quarter.

“We have made efforts to nurture commerce and content businesses,” Naver CEO Han Seong-sook said. “We will have remarkable growth within three years.”

She added that Naver would continue to support businesses that have great potential.