A Provider of Data Security-optimized Solutions
The author is an analyst of NH Investment & Securities. He can be reached at kyeongkeun.kang@nhqv.com. -- Ed.
Piolink is a provider of solutions for optimizing data security and data traffic management. We expect it to: 1) benefit from the government’s Digital New Deal policy; and 2) enjoy trickle-down effects from strengthening cloud business at NHN Entertainment, its largest shareholder. Boasting both robust growth potential and attractive valuations, Piolink deserves greater attention.
To benefit from explosion of data traffic as provider of security-optimized solutions
The Korean government has announced plans to achieve a 100% cloud conversion rate for administrative and public institutions by 2025 through investment of W830.0bn. Piolink produces application delivery controllers (ADCs) as its flagship products, which are capable of improving both data center efficiency and stability through optimized traffic management. Boasting the largest share of the domestic ADC market, the firm is expected to directly benefit from the government’s Digital New Deal policy.
In addition, Piolink’s security switch business is performing solidly both at home and abroad. The company has launched a cloud switch that can support remote equipment installation and error analysis, with its exports, mainly to the Japanese market, being in full swing. For 2021, Piolink’s security switch sales are anticipated to reach W11.1bn (+37.5% y-y), helped by stable domestic demand for L2/3 switches and brisk sales of cloud switches in Japan.
We expect Piolink to enjoy trickle-down effects from strengthening cloud business at NHN Entertainment.
In its business strategy announcement earlier this year, NHN Entertainment (Piolink’s largest shareholder) set a goal of achieving annual cloud business sales of W1tn by 2025. In detail, NHN Entertainment plans to sequentially expand its data centers in major base locations such as Pangyo (2015), Gwangju (2022), Gimhae (2023), and Suncheon (2025). As NHN Entertainment’s cloud managed service provider (MSP), Piolink provides integrated cloud services such as data center construction and consulting.
Moving ahead, we expect Piolink to enjoy steady earnings expansion, given the accelerating digital transformation, benefits from government policies, and synergies with NHN Entertainment. This year, we forecast that Piolink will log sales of W49.3bn (+23.8% y-y) and OP of W9.2bn (+40.8% y-y; OPM of 18.6%). The firm’s 2021E P/E sits at 9.6x, or only 6.0x if reflecting 2021E net cash of W40.4bn. Boasting both robust growth potential and attractive valuations, Piolink deserves greater attention in our view.