[Reporter Reading Securities Report] Why WiseNut, Whose Sales Had Stagnated, Is Expected to Grow 40% Next Year

Revenue Stagnates at 35 Billion Won Over the Past 3 Years... "Due to Temporary Demand Stagnation"
"Expecting Growth and New Product Effects in Next Year's Generative AI B2B Market"

WiseNut, a specialized artificial intelligence (AI) software company, has submitted a securities registration statement and is undergoing the initial public offering (IPO) process. Although WiseNut's recent sales have stagnated, it expects growth of over 40% next year. With the B2B (business-to-business) market blossoming and the anticipated effects of new products, it is forecasted to contribute positively to the company's performance.

WiseNut was established in 2000. It develops and supplies enterprise software based on AI technology. The company provides products to clients across various sectors, including government, finance, and legal institutions. Its main business areas include AI, search, big data, and services.

The core technologies are ▲communication technology based on generative AI ▲language understanding and information retrieval technology through AI ▲application analysis technology based on big data and machine learning. Recently, WiseNut has been expanding its business area through generative AI business based on RAG (retrieval-augmented generation) technology. The RAG technology, which is the focus of its research and development (R&D), has the advantage of compensating for the shortcomings of existing LLMs (large language models) in terms of reliability, timeliness, consistency, expertise, and efficiency.

Recent performance has been stagnant. On a consolidated basis, sales were KRW 35.4 billion in 2021, KRW 34.5 billion in 2022, and KRW 35.2 billion in 2023. Operating profit has actually decreased, recording KRW 5.1 billion in 2022, KRW 3.0 billion in 2023, and KRW 3.5 billion in 2023. The cumulative sales for the first three quarters of this year were KRW 21.5 billion, with an operating loss of KRW 2.9 billion. Compared to the same period last year, sales decreased by 1.12%, and the scale of operating loss increased.

Through the securities registration statement, the company explained that this is "due to a temporary stagnation in the adoption of AI in the public market," and that "experts identify this phase as a chasm (temporary demand stagnation) stage before generative AI is substantially introduced in the LLM-centered market."

Although performance is stagnant, growth is expected to accelerate from next year. WiseNut, preparing for listing using the technology special case system, projected next year's expected sales and operating profit at KRW 54.3 billion and KRW 10.9 billion, respectively. This represents increases of 44.63% and 404.60% compared to this year's expected sales and operating profit of KRW 37.6 billion and KRW 2.2 billion. It anticipates achieving sales of KRW 83.5 billion and operating profit of KRW 23.8 billion by 2026.

WiseNut expects growth as the B2B market is anticipated to blossom. A company official stated, "After passing through a market slowdown phase, the B2B market for generative AI will officially open and expand next year," adding, "Investments in AI solutions and adoption are expected to be more active than in the past." The official further explained, "We plan to intensify sales activities targeting upgrades for existing customers and focus on the top five companies in each industry."

The company also expects the effects of new products to emerge. The official emphasized, "For the new product WISEiRAG, performance has significantly improved compared to existing solutions, so we plan to set the supply price at two to three times higher," adding, "We expect not only an increase in sales volume but also the effect of price increases."

WiseNut used the price-to-earnings ratio (PER) to determine the public offering price. Comparable companies include Hancom (PER 23.42x), BI Matrix (22.97x), and MRO (60.43x). Their average PER is 35.61x. The inclusion of MRO raised the PER relatively high.

A company representative explained, "Both MRO and WiseNut provide B2B solutions that enhance corporate work efficiency using various AI technologies," adding, "Since both companies share the commonality of applying natural language processing technology, we judged the similarity to be high and selected them as comparable companies after consultation with the underwriters."

As WiseNut is entering KOSDAQ through the technology special case, it applied the average PER of comparable companies to the estimated net profit of KRW 18.6 billion in 2026 to calculate a per-share valuation of KRW 34,523. Applying a discount rate of 24.69% to 30.48%, the desired public offering price was set between KRW 24,000 and KRW 26,000. For reference, the average discount rate for technology growth companies from 2022 to 2024 ranges from 26% to 39.19%.

In this KOSDAQ public offering, WiseNut plans to offer 1.7 million shares. The expected public offering amount is between KRW 40.8 billion and KRW 44.2 billion. Based on the lower end of the offering price, KRW 7.5 billion will be used for facility funds, KRW 8.6 billion for operating funds, and KRW 24 billion for acquiring securities of other corporations.

The company plans to secure numerous necessary servers and the latest high-spec graphics processing units (GPUs) to develop and supply products stably. The largest portion of the facility funds, KRW 5.4 billion, will be spent on this. Additionally, operating funds will mainly be used for overseas expansion and talent acquisition. The company plans to focus on the Japanese market overseas, establishing a local office in Japan with a total expenditure of KRW 600 million. Furthermore, KRW 7.6 billion will be invested in R&D and hiring production technology personnel.

Through the securities registration statement, the company explained, "Due to the nature of the software industry, developer turnover rates tend to be relatively high," adding, "We plan to improve the working environment and recruit personnel to minimize developer turnover and enhance expertise and development efficiency for products in each field."

The largest expenditure on acquiring securities of other corporations will be KRW 14 billion next year and KRW 10 billion in 2026. WiseNut plans to invest equity in related companies that can increase market dominance and work efficiency in its main businesses such as AI, search engines, and big data.