[Reading Securities Report Journalist] "Expecting Profit This Year"... Innogrid Knocks on KOSDAQ via Technology Special Case

Expected Operating Profit of 2.5 Billion This Year... Return to Profitability
CEO Kim Myung-jin's Stake at 13% After Listing

Innogrid, a company specializing in cloud computing and digital transformation (DT), recently submitted its securities registration statement and is entering the final stage before listing on KOSDAQ. Although Innogrid is going public through a technology special listing, it is expected to quickly turn profitable thanks to its abundant order backlog.

Cloud Specialist Company... "Profitability Expected This Year"

Innogrid is a cloud specialist company established in 2006. Since 2009, when cloud computing first emerged, it has focused its capabilities in this field. In 2011, it launched its self-developed all-in-one private cloud solution, 'Cloudit.' Since then, it has grown by introducing ▲2018 OpenStack-based 'OpenStackit' ▲2020 multi-cloud operation management solution 'TapCloudit' ▲2021 PaaS solution 'SECloudit' for cloud-native development environments.

In particular, 'Cloudit' was developed purely with domestic technology. It was the first domestic cloud virtualization product to obtain the National Intelligence Service's Common Evaluation Certification (CC) and security function confirmation, recognizing its technological capability and security.

Innogrid is pursuing a technology special listing. Like most companies listing through technology special listings, Innogrid is currently operating at a loss. Except for 2021, it has posted losses continuously from 2020 through last year. However, its performance is growing rapidly. The average sales growth rate from 2021 to the third quarter of 2023 reached 92.61%. The preliminary financial statements show last year's sales at KRW 35.34 billion and an operating loss of KRW 911 million. Sales increased by 149.75% compared to the previous year, and the loss margin significantly decreased.

A notable point is the order backlog. The order backlog, which was KRW 890 million in 2020, increased to KRW 30.916 billion as of the third quarter of last year. Although it decreased due to sales recognition last year, the order backlog from the end of last year to recently still amounts to KRW 18.5 billion.

Along with rapidly increasing sales, the lead manager Korea Investment & Securities and Innogrid have set an early target for turning profitable. Innogrid expects to achieve sales of KRW 40.1 billion and operating profit of KRW 2.5 billion this year. This means it aims to achieve profitability this year. By 2026, it anticipates sales of KRW 67 billion and operating profit of KRW 21.1 billion.

Concerns Over Declining Major Shareholder Stake After Listing

Innogrid's desired public offering price ranges from KRW 29,000 to KRW 35,000. Korea Investment & Securities applied the price-earnings ratio (PER) when setting Innogrid's desired public offering price. The comparable companies used were Gabia, KIENX, and Openbase. The average PER of these companies is 19.93 times, and applying Innogrid's estimated net profit for 2026 results in a per-share valuation of KRW 45,464, to which a discount rate of 23.02% to 36.21% was applied.

The securities registration statement explained, "The reason for applying the estimated net profit for 2026 is that sales performance in each division of Innogrid is expected to stabilize, and the cost ratio is also expected to stabilize due to accumulated know-how from cumulative performance."

However, the dilution of the major shareholder's stake after listing is expected to be a concern. The major shareholder and related parties' stake, which was 23.23% before listing, will decrease to 20.07% after the public offering. In particular, the major shareholder, CEO Kim Myung-jin's stake will decrease from 15.31% to 13.22%.

Innogrid plans to raise KRW 17.4 billion to KRW 21 billion by offering 600,000 shares. Based on the lower end of the public offering price, KRW 13 billion will be used for facility funds and KRW 4.2 billion for operating funds. Notably, all facility funds will be invested in micro cloud data centers.

Through the securities registration statement, the company explained, "Innogrid's solutions will be installed in the micro cloud data center," adding, "By providing public cloud services, it is expected to secure stable sales during the operation period through a monthly billing system." It further added, "The micro cloud data center is not built as a large standalone building but operates by leasing part of an existing building."