[Click e Stocks] S-1, Growth 'Continues' Despite COVID-19

[Asia Economy Reporter Junho Hwang] Hana Financial Investment on the 28th set the target price for S-1 at 85,000 KRW. However, no investment opinion was provided.

S-1 recorded annual sales of 2.0233 trillion KRW(+3.3%, YoY) and operating profit of 204.5 billion KRW (+3.9%, YoY) last year. S-1's market share in the physical security market is 55%, showing stable performance growth. Despite the prolonged impact of COVID-19, the company achieved external growth through an increase in system security service subscribers, acquisition of new sites and increased maintenance work in the building management sector, and a net increase in contracts in the integrated security sector. In particular, it is expected to secure mid- to long-term growth drivers through the expansion of untact businesses such as artificial intelligence (AI) video analysis, biometric authentication, and smart building management.

By business segment, annual sales last year reached 1.0804 trillion KRW (+1.4%, YoY). In the system security sector, the number of commercial customers, which had driven subscriber growth in the past, slightly decreased in the first quarter of last year due to COVID-19. However, from the second quarter, annual new contracts reached 130,000 (+1.0%, YoY), and maintenance contracts 840,000 (+4.8%, YoY). Additionally, by restructuring low-profitability sites, the declining average revenue per user (ARPU) was maintained at the same level, fully reflecting the sales increase effect from subscriber growth.

The building management sector recorded annual sales of 596.7 billion KRW (+6.4%, YoY) last year due to an increase in new sites and year-end maintenance work. This was the result of an increase in order backlog from non-affiliated companies through aggressive sales activities and an increase in contract unit prices through expanded management services. The increase in year-end maintenance work also contributed to the sales growth.

In the integrated security sector, annual sales of 423.2 billion KRW (+14.6%, YoY) were

achieved last year as the contract renewal increases from major customers were reflected in sales.

The contract period with major customers is two years, and this renewal included a 1.5% increase in ASP per employee compared to existing contracts due to the minimum wage increases in 2019 and 2020, contributing to sales growth.