Sales to Grow in Line with Blossoming of AI Era
The author is an analyst of NH Investment & Securities. He can be reached at jack.baek@nhqv.com. -- Ed.
As a representative player in the field of natural language processing, VAIV Company boasts over 20 years of experience in the AI industry. We positively view the firm’s low SI sales portion and strong service sales volume. As a leading AI play, VAIV Company looks to deserve attention in light of expectations for 48% y-y sales growth and OP improvement this year.
Boasts strong technological competitiveness in range of AI-based services
VAIV Company’s cash cow is Sometrend, a subscription-based big data analysis service which accounts for 28% of overall sales and boasts GPM of about 70%. Based on a B2B sales model, Sometrend is utilized for decision-making in such areas as planning and marketing. Having been used for years by large corporate clients such as Samsung Electronics, the firm’s services are now seeing significant adoption among SMEs.
Meanwhile, accounting for 55% of total sales, VAIV Company’s AI Solver is a problem-solving solution focused on detection and discovery, which is mainly being used by public institutions. Of note, the firm has enjoyed recent orders worth W3.6bn from the National Tax Service to improve tax payment services and better respond to tax evasion, as well as orders worth W2.1bn from Korea Asset Management Corporation to develop a system for facilitating the takeover of bad debt from financial companies.
Going forward, AI Solver is expected to see adoption in a variety of arenas. We note that the firm’s expertise in digital twin technologies (which ultimately aim to digitally reproduce real-world objects) has helped it to participate in the Sejong and Busan Smart City projects. We expect the growth of the digital twin business to accelerate moving ahead on the back of advancements in the smart solutions domain, increased application in the prive sector, and an expansion of subscription-type services, as the related market continues to blossom.
Sales to grow in earnest in line with blossoming of AI era
VAIV Company is expected to log 2021 sales of W32bn (+48.0% y-y) and OP of W4.5bn (+394.6% y-y), with both figures showing strong improvement. While the firm’s 2021E P/E of 52.0x is not low, its global and domestic peers are trading at P/Ss of 32x and 6x, respectively. Listed on the Kosdaq under the special listing system for promising tech plays (based on its AA rating), VAIV Company currently deserves greater attention for its robust growth potential, in our view. Given that the majority of its overhang issues have been resolved since listing, and that it appears worthy of a valuation premium compared to domestic peers, we believe that VAIV Company’s undervaluation will be resolved.