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THE INVESTOR
June 13, 2021

Market Now

S&P, Moody’s affirm stable outlook for Naver

  • PUBLISHED :March 18, 2021 - 22:50
  • UPDATED :March 18, 2021 - 22:50
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Naver's headquarters in Pangyo, Gyeonggi Province (Yonhap)

Global credit rating agencies S&P Global Ratings and Moody’s have forecast stable growth for South Korean internet giant Naver, respectively assigning the firm ratings of A- and A3.

S&P said its rating reflected the Korean internet firm’s strong position in the search engine and e-commerce segments in Korea, adding that even tech behemoth Google had only recently made headway in the Korean market with video platform YouTube due to the Korean firm’s formidable leadership in the internet sector.

Naver’s fast-growing e-commerce and fintech businesses would serve as some of the firm’s growth engines, S&P said.

“Naver is likely to sustain its robust operating performance, mainly driven by strong e-commerce growth,” said the company, adding that the company could be expected to see “a strong 16-21 percent increase in revenue over the next two years.”

The revenue growth will be mainly led by a sharp increase in advertising revenue linked to the firm’s e-commerce.

Due to the coronavirus pandemic, the e-commerce industry has gathered steam recently, accounting for some 30 percent of total retail sales, according to the rating firm.

Mobile network firms SK Telecom and KT are among the companies that earned the grade A-, according to S&P’s credit rating standards.

Citing a rapid expansion of the firm’s nonsearch platform businesses, Moody’s predicted the Korean internet firm’s revenue would grow by 15-20 percent annually from 2021 to 2022.

“Naver’s A3 ratings reflect its dominant position in Korea’s online service industry as a leading search and e-commerce platform operator, improving business diversification, solid industry growth prospects, and strong balance sheet,” said Yoo Wan-hee, a Moody’s vice president and senior credit officer.

The robust revenue growth will lead to higher earnings, despite a likely moderation in profitability. Naver’s adjusted EBITDA margin will likely weaken modestly to 23 percent or 24 percent in 2021-2022 from around 25 percent in 2020 due mainly to less profitable new businesses, Moody’s predicted.

The state-run National Pension Service is the largest shareholder of the internet firm, with an 11.56 percent stake as of the end of 2020. Naver’s shares rose 6.91 percent to 410,000 won in intraday trading on March 18.

By Kim Young-won (wone0102@heraldcorp.com)

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