[Into the Stock] Shinsegae I&C, AI Technology Expected to Drive Revaluation

Up 16% While KOSPI Rose 11% This Year
Holding Cash Equivalent to 40% of Market Cap... Expectations for New Business

[Asia Economy Reporter Hyungsoo Park] The stock price of Shinsegae I&C has been steadily trending upward this year. This is attributed to the company holding cash equivalent to about 40% of its market capitalization and its recent increased interest in artificial intelligence (AI).

According to the financial investment industry on the 9th, Shinsegae I&C's stock price rose 16.0% this year. Considering that the KOSPI increased by 11.1% during the same period, the company's return outperformed the market by 4.9 percentage points.

Shinsegae I&C is a company responsible for system development and integration (SI) within the Shinsegae Group. It generates revenue by building, maintaining, and servicing solutions required by its affiliates. Sales related to the Shinsegae Group account for 70% of total revenue. The company developed systems such as Emart's dawn delivery system and Starbucks' delivery service.

As of the cumulative third quarter last year, Shinsegae I&C recorded sales of 426 billion KRW and operating profit of 26.3 billion KRW. Compared to the same period the previous year, sales increased by 11.3%, but operating profit decreased by 2.5%. The slight decline in profit was due to hiring additional personnel to pursue new businesses such as unmanned stores, cloud services, and electric vehicle charging. As of the end of the third quarter, the company held 125 billion KRW in cash and cash equivalents and 4.05 million treasury shares.

In January 2021, Shinsegae I&C launched the smart retail integrated brand "Sparos." Sparos provides self-payment POS, smart vending machines, hybrid unmanned stores, smart shelves, and fully unmanned store solutions. Sparos is applied to Shinsegae Group's delivery, unmanned stores, and smart logistics. Among Emart24 stores, the number of hybrid stores operated unmanned only at night has increased significantly every year, growing from 113 in 2020 to 1,400 as of the end of September last year.

Shinsegae I&C is expected to undergo a revaluation of its corporate value as it transforms from a dedicated SI company for the Shinsegae Group into a retail tech company. Efforts are ongoing to improve profitability by applying artificial intelligence (AI) technology to reduce unnecessary expenses and enhance service quality.

The Sparos AI chatbot not only provides simple automated consultations but also analyzes customer intent and offers a natural conversational interface. It can be trained and infer with less data compared to competitors. By adopting the chatbot, customer service can be provided 24/7, 365 days a year without operational time constraints. Handling frequently asked questions through the chatbot increases response capacity and reduces customer waiting time. This improves the level of consultation service while reducing operating costs, thereby enhancing profitability.

Shinsegae I&C is advancing AI vision technology necessary for building unmanned stores through its AI Lab. Utilizing data accumulated from operating unmanned stores, the technology is optimized for store management tasks such as customer location tracking, behavior recognition, and product identification. Machine learning technology has been applied to predict product demand. The technology is being enhanced to consider not only product sales patterns and product features and attributes but also weather, economy, and trends.

Hwang Se-hwan, a researcher at FS Research, said, "Considering the cash equivalents and treasury shares held, as well as the business value that records over 30 billion KRW in operating profit annually, the company is undervalued," adding, "We expect a revaluation reflecting the future value of new businesses."