Genians
The author is an analyst for NH Investment & Securities. He can be reached at esshim@nhqv.com -- Ed.
Due to a reported breach of Genians’ NAC solution, investor sentiment towards the firm has worsened, resulting in a share price plunge. However, no damage has been confirmed, and related business impacts should be minimal. Now is the time to focus on Genians’ continued earnings growth.
No confirmed damage from NAC weakness; impacts to be minimal
On Jun 7, a possible breach was discovered related to Genians’ NAC product. In the process of joint investigation with the Korea Internet & Security Agency (KISA), media outlets began reporting the news from Jun 30. However, a number of such reports contained misleading statements, including that a hacking group had stolen W10bn in cryptocurrency from an exchange in part by exploiting a vulnerability in the firm’s NAC update server, which sapped investor sentiment. Affected by such, Genians’ share price plummeted.
Although security incidents have occurred, no damage has yet been confirmed related to the firm or its customers, and additional investigation into related breaches, preemptive technical measures (eg, equipment replacement), and recurrence prevention have been undertaken in cooperation with the relevant authorities. Believing that impacts on sales and business operations will be minimal, we expect the issue to gradually fade. On Jul 5, Genians announced the purchase of treasury shares to enhance shareholder value and dispel concerns.
Pay attention to continued earnings growth
We expect Genians to log 2023 sales of W43.5bn (+13.1% y-y) and OP of W9.3bn (+34.9% y-y; OPM of 21.5%)—new record-high levels for the firm. Alongside the stable growth of Genian NAC, which has become the leading NAC solution in Korea, Genians’ EDR business, which is offering a next-gen terminal security solution, is also entering a full-fledged growth trajectory with continued client expansion. Anticipating that sales growth will lead to enhanced operating leverage, we expect the firm to post record-high earnings through 2025. Trading at a 2023E P/E of 14.3x, Genians shares are poised to enjoy sustained valuation re-rating on the dispelling of intrusion-related concerns and recognition of the firm’s business competitiveness and growth potential.