[Post IPO] 'Lanic's' Growth Stalls as China Expansion Pauses Due to COVID-19...

[Asia Economy Reporter Yoo Hyun-seok] The performance of Lanix, a system semiconductor solution specialist company, has stagnated since its listing. The company attempted to generate sales by conducting business in China, but plans were disrupted last year due to COVID-19. Currently, the company has opened an office in China and is strengthening its local business.

According to the Financial Supervisory Service's electronic disclosure system (DART) on the 16th, Lanix recorded sales of 9.1 billion KRW and an operating loss of 1.6 billion KRW last year. Sales increased by 0.92% compared to the previous year, but the operating loss grew larger.

Lanix was established in 2003 and entered the KOSDAQ market in September 2019. It specializes in automotive communication and security/authentication solutions. Its main business involves developing and providing solutions for automotive communication solutions, security authentication solutions, and IoT-related communication and security system semiconductors. The company developed and commercialized DSRC (Dedicated Short-Range Communications), primarily used for short-range communication in vehicles such as automatic toll collection. It currently supplies DSRC chips for Hi-Pass (ETCS) to domestic and overseas automakers.

At the time of listing, the securities registration statement projected sales of 21.5 billion KRW and an operating profit of 3 billion KRW for the previous year. Sales were expected to increase by 105.48% year-on-year, with operating profit turning positive. Lanix cited the Chinese market as one of the factors for performance improvement. The company signed a memorandum of understanding (MOU) with a local Chinese firm and planned to supply ETCS terminal chips and software exclusively for the before-market.

Furthermore, it expected sales of 32.2 billion KRW with an operating profit of 5 billion KRW in 2021, and 48.6 billion KRW with 10 billion KRW operating profit in 2022. Based on these performance forecasts, Lanix set its public offering price at the time of listing. It applied an annual discount rate of 25% to the estimated net profit of 10 billion KRW in 2020. Additionally, it used a price-earnings ratio (PER) of 29.30 times from comparable companies, resulting in a valuation of 12,538 KRW.

Korea Investment & Securities, the lead underwriter, and Lanix applied a discount rate of 16.26% to 36.20% to the valuation, calculating a desired public offering price range of 8,000 to 10,500 KRW. However, market response was cold during the final pricing. Among 401 institutional investors, 357 suggested the lower end of the band, accounting for 89% of the total. Consequently, the public offering price was finalized at 6,000 KRW, below the desired lower limit.

At the time, the stock market was sluggish, and institutions were not confident in Lanix's growth potential. So far, the institutions' outlook has been accurate. Last year, all plans were disrupted due to COVID-19, resulting in stagnant performance. Lanix explained in its business report that discrepancies in performance occurred due to overseas travel restrictions affecting new sales activities. A company representative stated, "Losses also increased due to research and development (R&D) and issuance of new stock acquisition rights."

However, in China, the company has opened a local office and is conducting business. A company representative said, "To strengthen local response, we have established a local office in the Pudong New Area of Shanghai, China, and are currently operating it. Regarding the Chinese DSRC before-market, we are gradually discussing and collaborating on selecting OEM (Original Equipment Manufacturer) targets and customizing product directions for concrete market entry and response."

The part expected to generate new sales is still undergoing R&D. Lanix had anticipated performance improvement through entry into the Chinese DSRC market last year, meaningful sales from the low-power wide-area network (LPWAN) platform business in 2021, and growth in the vehicle-to-everything (V2X) solution business sector in 2022.

A company representative explained, "Regarding LPWAN, Lanix is developing a personal emergency system; last year, we produced a prototype, and this year, we aim for commercialization. For V2X, after 3GPP established the 5G-NR-V2X communication protocol standard in July last year, we have been actively pursuing solution development and are currently focusing on modem chip development."