[Featured Stock] Chips&Media Emerges as Beneficiary of Expanded AI Analysis Targets

On the 27th, Chips&Media's stock price is on the rise. As AI analysis targets are expanding from text-centered to video-centered, buying interest is flowing in based on the judgment that the company stands to benefit the most from the expansion of video analysis.

As of 10:17 AM, Chips&Media's stock price is trading at 23,800 KRW, up 1.71% compared to the previous trading day. It even rose to 24,100 KRW in early trading.

On this day, 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. The target price was calculated by applying a target multiple of 27.2 times, which is a 35% discount on the average price-earnings ratio (PER) of 41.8 times of global peers (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 text-centered, the scope is now expanding to images and videos, and it is expected that the focus of the generative AI era will expand to videos. With the advent of the video analysis and generative AI era, demand for video IP is expected to increase explosively. Researcher Park Jong-sun of Eugene Investment & Securities noted, "The company is already participating in the development of AI-related server NPUs and edge NPUs, so AI-related license sales are gradually expanding, and future royalty sales could also grow rapidly, which is positive."

Due to ongoing semiconductor-related disputes between the US 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 US 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 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% respectively compared to the same period last year," adding, "In particular, deferred license sales and royalty sales from last year are expected to be reflected, leading to stable performance growth."