[Click eStock] "S1, 4Q Results Below Expectations"…Target Price Downward Revised

[Asia Economy Reporter Lee Jung-yoon] Heungkuk Securities announced on the 4th that it has lowered the target price of S-1 by 10,000 KRW to 100,000 KRW, applying a price-earnings ratio (PER) of 24 times based on this year's expected earnings per share (EPS). However, it maintained a buy investment opinion.

S-1 recorded sales of 595.7 billion KRW in the fourth quarter of last year, up 2.1% year-on-year, and operating profit of 11.6 billion KRW, down 74.8% year-on-year. The disappointing fourth-quarter performance, which fell short of expectations, is analyzed to be due to one-time factors such as group incentive payments and costs related to workforce restructuring. Researcher Hwang Sung-jin of Heungkuk Securities explained, "When these factors are removed, the performance is evaluated as fundamentally sound."

However, as of the previous day, S-1's stock price was 69,300 KRW, showing a downward trend compared to the 52-week high of 86,600 KRW. Researcher Hwang said, "Concerns about the partial external opening of some facilities management of affiliates, which were raised by some, are already reflected in the stock price," and added, "The impact on fundamentals is also expected to be limited."

Researcher Hwang added, "Considering the special nature of the security business, there is no realistic alternative for the sensitive system security field, and the proportion of non-security areas, which are not in a fully covered state, is relatively small."

S-1 has continued growth across all business areas including security systems, integrated security, and building management, which is evaluated to be influenced by the expansion of new business sites and an increase in contract numbers. As of the end of the fourth quarter last year, the number of maintenance subscribers was 882,000, the cancellation rate was 2.5%, and the average revenue per user (ARPU) was maintained at about 103,000 KRW.

S-1 is expected to continue a stable growth trend this year. There is a steady increase in subscribers in the system security sector, and demand for building management business is expected to expand due to the increase in new business sites. Also, the scope of stable integrated security services based on the captive market is gradually expanding, extending coverage from the existing system security-oriented business to integrated security solutions and comprehensive real estate service businesses.

Researcher Hwang estimated that S-1's annual sales this year will increase by 5.5% year-on-year to 2.4396 trillion KRW, and operating profit will increase by 16.1% year-on-year to about 208.5 billion KRW.