Core Viewpoint - KT Corporation is transitioning into an AICT company, focusing on integrating IT and AI with telecommunications, while AT&T is enhancing its core wireless business and expanding 5G and fiber coverage in the U.S. [2][7] KT Corporation - KT is developing an AI lineup anchored by its proprietary Mi:dm2.0 large language model, with early contract wins from government and water resource sectors [2] - The company has partnered with Microsoft to integrate AI into its services and plans to introduce a tailored AI model by late 2025 [3] - KT's AI IT business revenues increased by 13.8% year over year, and KT Cloud revenues rose by 23% due to data center growth [3] - The company has a stable dividend policy and a KRW 1 trillion share buyback plan, reflecting confidence in future cash flows [4] - Management has committed KRW 1 trillion over five years for cybersecurity, which may pressure near-term profitability [5] - The domestic telecom market is heavily penetrated, limiting organic growth opportunities, and competition from SK Telecom and LG Uplus poses risks [6] AT&T - AT&T is focusing on its core wireless business and expanding its 5G and fiber coverage, with a strategy based on mobile 5G, fixed wireless, and edge computing [7] - The acquisition of mid-band spectrum from EchoStar is expected to enhance 5G performance and reduce capital investment needs [8] - AT&T reported 270,000 net adds for Internet Air, doubling year over year, and over 550,000 new subscribers to advanced broadband services [9] - The company aims to reach over 60 million fiber customer locations by 2030, with significant growth in fiber subscribers [10] - AT&T generated $4.9 billion in free cash flow in Q3 2025 and returned $3.5 billion to shareholders, indicating strong cash flow generation [11] - The wireline division faces persistent losses, with revenues down 7.8% year over year due to competitive pressures [12] Share Performance and Valuation - Over the past month, KT and AT&T shares declined by 1.9% and 9%, respectively [14] - KT's shares are trading at a price/book ratio of 0.75X, lower than AT&T's 1.45X [16] - Analysts have revised earnings estimates downward for KT, while AT&T's estimates remain unchanged [17][19] Consensus Estimates - Current earnings estimates for KT show a downward revision of 3.21% for F1 and 2.53% for F2 [18] - AT&T's earnings estimates have seen a positive revision trend, particularly for Q1 and F2 [19] Investment Outlook - AT&T holds a Zacks Rank of 3 (Hold), while KT Corporation has a rank of 4 (Sell), suggesting AT&T may be a better investment choice at this time [20]

Core Insights - KT Corporation (KT) reported a significant 105.4% year-over-year increase in operating profit to KRW 1,014.8 billion, with revenue rising 13.5% to KRW 7,427.4 billion, driven by strong performance in traditional telecom and AI initiatives [1][10] Financial Performance - KT Cloud achieved a 23% revenue growth, while KT Studio Genie saw a 6% increase, contributing to the overall performance and diversification of income streams [2] - Net income surged 78.6% year-over-year to KRW 733.3 billion, and EBITDA increased by 36.3% to KRW 1,990.7 billion [2] - Operating expenses rose 5.9% year-over-year, despite lower labor costs from real estate sales [5] Strategic Initiatives - The company is transitioning into an Artificial Intelligence and Information and Communications Technology (AICT) firm, launching its proprietary large language model (LLM), Mi:dm 2.0, in July [3][10] - KT has secured AI platform projects with major enterprises and public-sector clients, indicating a commitment to integrating AI across various applications [4] Competitive Landscape - KT faces execution risks during its transition to an AICT company, alongside competition from SK Telecom and Telefonica [6] - SK Telecom reported a consolidated revenue of KRW 4.34 trillion, with a significant decline in operating profit by 37.1% year-over-year [7] - Telefonica's operating income decreased by 6.7% in the second quarter of 2025, but it continues to expect organic growth in revenues and EBITDA for the year [8] Market Position and Valuation - KT stock has increased by 18.1% over the past year, compared to the Zacks Wireless Non-US market industry's 30% growth [11] - The stock is trading at a price/book multiple of 0.73X, significantly lower than the industry's 2.32X [12] - Estimates for KT have been marginally revised upwards for the current year [13]

Core Insights - The article discusses the importance of the price-to-book (P/B) ratio as a tool for value investing, highlighting its utility in identifying undervalued stocks with strong growth potential [1][2]. Group 1: Understanding P/B Ratio - The P/B ratio is calculated by dividing the current stock price by the book value per share, indicating how much investors pay for each dollar of book value [2][6]. - A P/B ratio of less than one suggests that a stock is undervalued, while a ratio greater than one indicates overvaluation [6][7]. - The P/B ratio is particularly relevant for industries with tangible assets, such as finance and manufacturing, but may be misleading for companies with high R&D expenses or significant debt [9][10]. Group 2: Screening Criteria for Value Stocks - Stocks with a P/B ratio lower than the industry median are considered attractive, as they have room for price appreciation [12]. - Additional screening parameters include a lower price-to-sales (P/S) ratio than the industry median, a price-to-earnings (P/E) ratio below the industry average, and a PEG ratio of less than one, indicating undervaluation relative to growth prospects [13][14][15]. - Stocks must also have a minimum trading price of $5 and a substantial average trading volume to ensure liquidity [14][15]. Group 3: Selected Low P/B Stocks - StoneCo (STNE) offers financial technology solutions and has a projected 3-5 year EPS growth rate of 30.3%, with a Zacks Rank of 1 and a Value Score of B [16]. - PagSeguro Digital (PAGS) provides digital payment solutions and has a projected EPS growth rate of 14.2%, also holding a Zacks Rank of 1 and a Value Score of B [17]. - KT Corporation (KT) is a telecommunications provider with a projected EPS growth rate of 51.7% and a Zacks Rank of 2 with a Value Score of A [19]. - Arrow Electronics (ARW) is a major distributor of electronic components, with a projected EPS growth rate of 20.7% and a Zacks Rank of 2 with a Value Score of A [19]. - CVS Health has a projected EPS growth rate of 14.3% and holds a Zacks Rank of 2 with a Value Score of A [20].

Core Viewpoint - KT Corporation's shares have declined approximately 13.5% over the past three months, underperforming the Zacks Wireless Non-US Markets growth of 10.6, despite strong underlying fundamentals and a strategic pivot towards Artificial Intelligence and Information and Communications Technology (AICT) [1][10]. Financial Performance - In Q2 2025, KT reported a revenue increase of 13.5% year over year, reaching KRW 7,427.4 billion, while operating profit more than doubled to KRW 1,014.8 billion, driven by robust performance in traditional telecom and AI initiatives [6][10]. - The AI IT business revenues grew by 13.8% year over year, and revenues from KT Cloud increased by 23%, reflecting strong data center momentum and project wins [11]. Strategic Transformation - KT is transitioning from a traditional telecom company to an AICT firm, integrating IT and AI with telecommunications to offer unique services [7]. - The company is developing a comprehensive AI lineup anchored by its proprietary Mi:dm2.0 large language model, with early contract wins from government and public sector entities [8]. - KT has partnered with Microsoft to enhance its AI capabilities, integrating an AI agent into Genie TV and planning to introduce a tailored AI model for Korea in the second half of 2025 [9]. Shareholder Returns - KT has a stable dividend policy and a KRW 1 trillion share buyback plan, with KRW 250 billion already completed, indicating strong confidence in future cash flow [13]. - The dividend for Q2 was raised by 20% year over year to KRW 600 per share, enhancing the appeal of KT shares to investors [13]. Valuation and Market Position - KT's stock is trading at a price/book multiple of 0.72X, significantly lower than the industry average of 2.22X, indicating a potential undervaluation [18]. - Compared to peers, KT's stock performance has lagged, with SK Telecom down 6.1% and América Móvil gaining 23.3% over the same period [20]. Long-term Outlook - Despite recent stock declines, KT's solid financial performance, AICT transformation, and expanding partnerships position it for sustained long-term growth [21]. - The company's disciplined expense management and aggressive share buyback program are additional positives for potential investors [21].

Core Insights - KT Corporation is transitioning from a traditional telecom company to an Artificial Intelligence and Information and Communications Technology (AICT) firm, integrating IT and AI with telecom capabilities to enhance customer value [1][11] AICT Strategy - KT is developing a comprehensive AI lineup centered around its proprietary Mi:dm2.0 large language model (LLM), which supports AI platform projects for both enterprise and public sectors, with initial contracts secured from Gyeonggi provincial government and Korea Water Resources Corporation [2] - The company has partnered with Microsoft to integrate an AI agent powered by Azure OpenAI into Genie TV, and plans to launch a Korea-specific AI model using ChatGPT in the second half of 2025 [3] - KT is investing KRW 1 trillion over five years to bolster its cybersecurity efforts as part of its digital transformation [3] Financial Performance - In Q2 2025, KT reported a 13.5% year-over-year increase in revenues to KRW 7,427.4 billion, with operating profit more than doubling to KRW 1,014.8 billion, driven by strong performance in telecom and AI-driven sectors [4][11] - AI IT business revenue grew by 13.8% year-over-year, while KT Cloud revenues surged by 23%, attributed to increased data center activity and successful DBO project wins [4][11] Market Position and Competitors - KT's shift towards AICT positions it to capitalize on emerging opportunities in AI infrastructure, cloud computing, and enterprise digital transformation [5] - Competitors like SK Telecom and Telefónica are also pursuing aggressive AI strategies, with SK Telecom implementing AI Pyramid 2.0 and Telefónica advancing its Autonomous Network Journey [6][7][8] Stock Performance and Valuation - KT's stock has decreased by 7.4% over the past month, contrasting with a 0.2% decline in the Zacks Wireless Non-US market [12] - The stock is currently trading at a price/book multiple of 0.73X, significantly lower than the industry average of 2.22X, indicating a substantial discount [16]

Core Viewpoint - KT Corp. has been upgraded to a Zacks Rank 1 (Strong Buy) due to an upward trend in earnings estimates, which is a significant factor influencing stock prices [1][2]. Earnings Estimates and Stock Price Movement - The Zacks rating system is based on changes in earnings estimates, which are strongly correlated with near-term stock price movements [3][5]. - Institutional investors utilize earnings estimates to determine the fair value of stocks, leading to buying or selling actions that affect stock prices [3]. Business Improvement Indicators - The increase in earnings estimates for KT Corp. indicates an improvement in the company's underlying business, which is expected to positively influence its stock price [4][9]. - For the fiscal year ending December 2025, KT Corp. is projected to earn $2.80 per share, with a 5.3% increase in the Zacks Consensus Estimate over the past three months [7]. Zacks Rank System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with Zacks Rank 1 stocks historically generating an average annual return of +25% since 1988 [6][8]. - KT Corp.'s upgrade to Zacks Rank 1 places it in the top 5% of Zacks-covered stocks, indicating a strong potential for near-term price appreciation [9].

Group 1 - U.S. stock futures are higher, with Dow futures gaining approximately 0.2% [1] - Lovesac Co reported a quarterly loss of 45 cents per share, which was better than the analyst consensus estimate of 71 cents loss per share [1] - Lovesac's quarterly sales reached $160.530 million, exceeding the analyst consensus estimate of $160.229 million [1] Group 2 - Lovesac reduced its FY2026 GAAP EPS guidance from a range of $0.80-$1.36 to $0.52-$1.05 [2] - Lovesac shares fell 13% to $18.05 in pre-market trading following the guidance cut [2] Group 3 - Avidity Biosciences, Inc. experienced a 20.1% decline to $37.08 after announcing a $500 million common stock offering [4] - Veritone, Inc. dropped 18.7% to $2.96 due to the pricing of a $25 million public offering [4] - Lesaka Technologies Inc saw a 15.8% decrease to $3.98 following its fourth-quarter results [4] - Murano Global Investments Plc fell 14.8% to $3.50 after a previous 18% drop [4] - QMMM Holdings Ltd decreased 13.2% to $95.01 after a 47% decline on Wednesday [4] - CI&T Inc. fell 9.8% to $4.53 after a 3% decline on Wednesday [4] - Enovix Corp dropped 7.1% to $8.50 after announcing a $300 million convertible notes offering [4] - KT Corp fell 4% to $18.95 in pre-market trading [4]

Core Viewpoint - KT Corporation (KT) is rated as a Buy due to improved competitive positioning in its mobile business and effective monetization of non-core assets [1]. Group 1: Company Overview - KT Corporation is highlighted as a key player in the mobile business sector, with a strengthened competitive position [1]. - The company is part of a research service focused on value investing in Asia, particularly targeting stocks with significant discrepancies between market price and intrinsic value [1]. Group 2: Investment Strategy - The investment strategy emphasizes deep value balance sheet bargains, such as net cash stocks and low price-to-book (P/B) stocks, as well as wide moat stocks that represent high-quality businesses [1]. - The research service provides monthly updates and watch lists for value investors seeking opportunities in the Hong Kong market [1].

Financial Performance - KT Corporation reported operating revenue of W7,427,337 million for the three-month period ended June 30, 2025, representing a 13.4% increase from W6,546,399 million in the same period of 2024[20]. - The operating profit for the six-month period ended June 30, 2025, was W1,703,589 million, up 70.1% from W1,000,486 million in the prior year[20]. - Profit for the period attributable to owners of the controlling company increased to W1,227,780 million for the six-month period ended June 30, 2025, compared to W768,555 million in 2024, marking a 59.8% growth[20]. - Profit for the three-month period ended June 30, 2025, increased to W733,282 million, up 78.5% from W410,541 million in 2024[22]. - Profit for the six-month period ended June 30, 2025, reached W1,300,081 million, a 61.7% increase compared to W803,544 million in 2024[22]. - Total comprehensive income for the three-month period ended June 30, 2025, was W859,543 million, representing a 64.0% increase from W523,478 million in 2024[22]. - Total comprehensive income for the six-month period ended June 30, 2025, amounted to W1,433,328 million, up 33.7% from W1,072,816 million in 2024[22]. Assets and Liabilities - Total assets as of June 30, 2025, amounted to W42,193,327 million, a slight increase from W41,879,957 million at the end of 2024[17]. - Current liabilities decreased to W12,123,497 million as of June 30, 2025, down from W13,874,734 million at the end of 2024, reflecting a 12.6% reduction[18]. - The company’s total liabilities decreased to W23,316,209 million as of June 30, 2025, from W23,883,408 million at the end of 2024, a decline of 2.4%[18]. - The total equity attributable to owners of the controlling company rose to W17,123,836 million as of June 30, 2025, compared to W16,210,702 million at the end of 2024, indicating a 5.6% increase[18]. - The balance of total equity as of June 30, 2025, was W18,877,118 million, an increase from W17,996,549 million as of June 30, 2024[25]. Cash Flow and Investments - Cash generated from operations decreased to W2,793,143 million in 2025 from W3,428,623 million in 2024, representing a decline of approximately 18.5%[26]. - Net cash inflow from operating activities fell to W2,686,288 million in 2025, down from W3,236,326 million in 2024, a decrease of about 17.0%[26]. - Net cash outflow from investing activities increased significantly to W(2,417,684) million in 2025 compared to W(1,168,040) million in 2024, indicating a rise of approximately 106.8%[27]. - Proceeds from borrowings rose to W3,651,239 million in 2025, up from W2,060,181 million in 2024, an increase of about 77.2%[27]. - Dividends paid decreased to W288,392 million in 2025 from W626,429 million in 2024, a reduction of approximately 54.9%[27]. Segment Performance - The ICT segment generated operating revenues of W9,454,830 million for the six-month period ended June 30, 2025, up from W9,243,124 million in 2024, a growth of 2.3%[150]. - The Finance segment reported operating revenues of W1,663,572 million for the six-month period ended June 30, 2025, compared to W1,780,963 million in 2024, a decrease of 6.6%[150]. Shareholder Returns - A quarterly dividend of W600 per share was declared, totaling W144,658 million, with a dividend yield of 1.1%[178]. - Dividends paid by the controlling company totaled W482,970 million for the six-month period ended June 30, 2024[24]. Financial Instruments and Valuation - The company reported finance income of W476,230 million for the six-month period ended June 30, 2025, compared to W468,632 million in the same period of 2024, reflecting a 1.4% increase[20]. - The company reported a significant increase in cash due to consolidation scope change, rising to W126,968 million in 2025 from W9,847 million in 2024[26]. - The total financial assets as of June 30, 2025, were valued at W15,982,983 million, compared to W15,315,773 million as of December 31, 2024[166]. - The total financial liabilities as of June 30, 2025, were W18,782,468 million, slightly down from W18,809,013 million as of December 31, 2024[166]. Legal and Regulatory Matters - The Group is currently a defendant in 165 lawsuits with a total claimed amount of KRW 155,918 million as of June 30, 2025, an increase from KRW 141,941 million at the end of 2024[117].

Financial Data and Key Metrics Changes - Operating revenue increased by 13.5% year over year, reaching KRW 7,427.4 billion [6] - Operating profit rose by 105.4% year over year, amounting to KRW 1,014.8 billion, supported by balanced growth in the telco business and one-time gains from real estate sales [6] - Net income increased by 78.6% year over year to KRW 733.3 billion, driven by higher operating profit [6] - EBITDA grew by 36.3% year over year, reporting KRW 1,990.7 billion [6] - Operating expenses increased by 5.9% year over year, totaling KRW 6,412.6 billion [7] Business Line Data and Key Metrics Changes - Wireless revenue increased by 0.9% year on year, reporting KRW 1,781.7 billion, with 5G subscribers accounting for 79.5% of total handset subscribers [8] - Fixed line broadband revenue grew by 2.1% year over year, reaching KRW 631.4 billion, driven by Giga Internet subscriber growth [9] - B2B service revenue posted a 4.5% year on year growth, supported by telecom and AI/IT services [10] - AIIT business revenues saw a significant increase of 13.8% year over year [10] - KT Cloud revenue grew by 23% year on year, driven by increased data center usage [11] Market Data and Key Metrics Changes - The company noted that the 5G penetration rate is above 80%, indicating a mature market [20] - The handset replacement cycle has lengthened, affecting market dynamics [20] Company Strategy and Development Direction - KT is focused on transforming into an AICT company and enhancing corporate value through strategic initiatives [3][12] - The company plans to complete a share buyback of KRW 250 billion and has increased its dividend by 20% year over year [4] - KT is actively pursuing large-scale AI projects and collaborations, including partnerships with Microsoft and Palantir [16][17] - The company aims to leverage AI capabilities to enhance operational efficiency and service offerings [18] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in sustaining solid service revenue growth into the second half of the year, despite a significant one-time gain in Q2 [24] - There are concerns about potential increases in commissions and selling-related expenses, but these are linked to earnings performance [25] - The company is committed to maintaining a shareholder-friendly dividend policy and plans additional share buybacks [27] Other Important Information - KT plans to invest KRW 1 trillion in information security over five years to enhance customer safety [5] - The company is developing a Korean-tailored AI model powered by ChatGPT for its services [5] Q&A Session Summary Question: AI business direction and M&P market outlook - Management highlighted three strategies for AI: partnerships with global tech firms, a multi-model strategy, and leveraging AI for operational efficiency [16][17] - Regarding the M&P market, management noted that while competition may heat up with new handset launches, it is not expected to be long-lasting due to high 5G penetration and longer handset replacement cycles [20] Question: Outlook for the second half and updates on the value plan - Management expects to continue good momentum into the second half, driven by solid service revenue and improved cost management [24] - The dividend decision is based on 50% of adjusted net profit, and management is confident in meeting market expectations for shareholder returns [26][27]