[Click eStock] Chips&Media, AI Video Analysis Biggest Beneficiary 'Target Price Up'

On the 27th, Eugene Investment & Securities maintained a buy rating on Chips&Media and raised the target price by 34.2% from 24,000 KRW to 32,000 KRW. This decision was based on the expectation that Chips&Media will be the biggest beneficiary as AI analysis expands from text-centered to video-centered content. The target price was calculated by applying a target multiple of 27.2 times, which is a 35% discount on the global peers’ average price-to-earnings ratio (PER) of 41.8 times (SYNOPSYS, LATTICE SEMICONDUCTOR, CEVA), to the expected 2023 earnings per share (EPS) of 1,195 KRW. The 35% discount factor reflects concerns about additional price increases due to the relatively domestic stock market environment and recent high stock price rises.

Although global data analysis has been primarily text-based, the scope is now expanding to images and videos, and it is expected that the target of generative AI will increasingly focus on videos. With the advent of video analysis and generative AI, demand for video IP is expected to increase explosively. Researcher Park Jong-sun of Eugene Investment & Securities noted, "The company is already involved in developing AI-related server NPUs and edge NPUs, and as AI-related license sales gradually expand, royalty sales are also expected to grow rapidly in the future, which is positive."

Due to ongoing semiconductor-related disputes between the U.S. and China, Chips&Media’s license sales targeting both countries have been steadily increasing, and recently, royalty sales have also been stably generated. While sales in the U.S. and China have shown stable growth, sales in the Japanese market also increased significantly last year (Japanese sales: 800 million KRW in 2021, accounting for 4.1% of total sales → 3.5 billion KRW in 2022, accounting for 14.5%), which is also positive.

Researcher Park emphasized, "We expect continued performance growth with first-quarter sales of 6 billion KRW and operating profit of 1.4 billion KRW, up 18.4% and 34.7% year-on-year, respectively. In particular, deferred license sales and royalty sales from last year are expected to be reflected, leading to stable performance growth."