AI Platforms And Smart Home Trends Will Shape Future Connectivity

Key Takeaways

• Growth in smart home, digital safety, and advanced broadband services, backed by AI and network investments, strengthens revenue streams and market positioning.
  
• Capital return initiatives and enterprise infrastructure expansion enhance earnings quality and support confidence in long-term profitability.
  
• Digital disruption, industry competition, aging demographics, heavy investment, and regulatory risk all threaten LG Uplus's ability to sustain long-term revenue growth and profitability.

Catalysts

Provides various telecommunication services primarily in South Korea.

• Continued expansion in smart home and digital safety offerings, supported by robust growth in gigabit broadband and differentiated subscription/IPTV products, positions LG Uplus to capture sustained revenue growth and higher ARPU as households increase their demand for secure, connected services.
  
• Surge in data consumption-demonstrated by strong mobile subscriber additions and nearly 80% 5G handset penetration-supports long-term top-line growth, especially as next-generation network investments enable LG Uplus to upsell premium connectivity and value-added services, positively impacting revenue and margins.
  
• Investment in AI-powered platforms and security solutions (e.g., anti-deepfake/voice, AI-driven contact centers, and participation in the national sovereign AI initiative) enhances product differentiation and operational efficiency, which can lower cost structures and help expand net margins over time.
  
• Expansion of enterprise infrastructure, including new data centers and AI cloud offerings, leverages industry-wide migration toward digital services and IoT proliferation, creating new high-margin revenue streams and improving overall earnings growth potential.
  
• Ongoing execution of capital return programs-evidenced by share buybacks, dividend policy, and treasury share cancellation-should improve per-share earnings metrics and signal confidence in cash generation, supporting valuation upside as free cash flow grows.

LG Uplus Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming LG Uplus's revenue will grow by 2.4% annually over the next 3 years.
• Analysts assume that profit margins will increase from 2.8% today to 4.9% in 3 years time.
• Analysts expect earnings to reach ₩784.3 billion (and earnings per share of ₩1826.76) by about August 2028, up from ₩409.1 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting ₩1079.4 billion in earnings, and the most bearish expecting ₩660.8 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 8.5x on those 2028 earnings, down from 15.5x today. This future PE is lower than the current PE for the KR Telecom industry at 21.9x.
• Analysts expect the number of shares outstanding to decline by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.83%, as per the Simply Wall St company report.

LG Uplus Future Earnings Per Share Growth

Risks

• Intensifying digital platform consolidation and migration to OTT services, evidenced by LG Uplus's declining IPTV revenue (-1.3% YoY) and focus on digital transformation, suggest increasing risk that global tech players and internet-based communication will erode traditional telco and core Smart Home revenues, threatening long-term topline and ARPU growth.
  
• Ongoing population aging and demographic decline in South Korea, coupled with visible market saturation (IPTV, broadband, and mobile showing subscriber growth but only modest revenue lift), limits organic subscriber growth potential, presenting secular headwinds to future revenue expansion.
  
• Heightened marketing competition flagged after the repeal of the Handset Subsidy Act, and the potential for short-term price wars in response to peers' subscriber losses and new device launches, increase the risk of margin compression and elevated acquisition costs, which could hurt profitability and net margins.
  
• LG Uplus's significant investments in AI, data centers, and B2B expansion necessitate sustained high CapEx and introduce execution risk; if these strategic bets fail to outpace peers or if debt levels rise again, free cash flow and net income could be pressured by fixed costs and debt servicing needs.
  
• The risk of regulatory intervention remains material: government policies around handset pricing, consumer protection, and potential network sharing could force price reductions or limit ARPU gains, directly impacting both revenue and operating profits over the long term.

Valuation

• The analysts have a consensus price target of ₩15804.0 for LG Uplus based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₩20000.0, and the most bearish reporting a price target of just ₩10400.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₩15875.3 billion, earnings will come to ₩784.3 billion, and it would be trading on a PE ratio of 8.5x, assuming you use a discount rate of 6.8%.
  
• Given the current share price of ₩14780.0, the analyst price target of ₩15804.0 is 6.5% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.