[Click eStock] "Ubiquoss, Undiscovered Beneficiary of Physical AI... Target Price 22,000 Won"

"Potential for Aggressive M&A Activity Also Anticipated"

On January 21, Hana Securities resumed coverage of Ubiquoss, a network company, describing it as an "undiscovered beneficiary of physical AI (artificial intelligence)." The brokerage issued a "Buy" rating and set a target price of 22,000 won. The previous day's closing price was 9,180 won.

On the same day, Hongshik Kim, a researcher at Hana Securities, stated, "With the activation of physical AI expected to drive increased traffic, demand for Ubiquoss's fiber-to-the-home (FTTH) and switch equipment is likely to remain strong for several years." He added, "If the Ministry of Science and ICT's policy expands the penetration rate of optical cables from the current 91% to 98% by 2030, FTTH revenue could visibly recover."

He continued, "Among telecommunications equipment companies, Ubiquoss stands out for its exceptional cash generation capability, enabling it to pursue aggressive mergers and acquisitions (M&A). This could secure new growth engines and trigger a revaluation of its stock price." He emphasized, "The current price-to-book ratio (PBR) is at a historical low of 0.7 times."

He particularly highlighted the importance of telecommunications networks that organically connect computing resources in the process of activating physical AI. He said, "Government policies are being implemented to expand optical cable penetration rates and backbone network capacity, and Ubiquoss is expected to emerge as a leading beneficiary of these policies."

For the fourth quarter of last year, he forecast sales of 33.6 billion won and operating profit of 9.1 billion won. He explained that the resumption of investments by telecom operators would drive FTTH sales to 18.4 billion won, fueling revenue growth, and that fixed cost leverage would improve profit margins.

The potential for aggressive M&A activity is also a positive factor. Kim noted, "Ubiquoss boasts the strongest financial soundness among telecommunications equipment companies, with cash holdings in the 80 billion won range, a current ratio of 804%, and a debt ratio of 16%." He added, "The company could acquire a quantum cryptography firm to equip its wired devices with quantum cryptography solutions. Considering that this year marks the inaugural year of domestic and international spectrum auctions, it may also be worth considering the acquisition of a wireless equipment company with the potential for explosive earnings growth."