Earnings to Expand in Lockstep with Fintech Industry Growth
The author is an analyst of NH Investment & Securities. He can be reached at jack.baek@nhqv.com. -- Ed.
Aton is to continue enjoying sound performances at both the license business of the fintech security solutions arm and the mobile OTP business, its two primary focal points. Even amid off-seasonality, the company posted strong 1Q22 OP, and further earnings growth is anticipated in 2Q22 on the addition of clients at the mobile OTP business.
2022E OP: Annual OP to top W10bn for first time since establishment
Aton is poised to secure both healthy earnings growth and solid profitability, with 2022 sales and OP estimated at W49.4bn (+14.2% y-y) and W10.7bn (+16.6% y-y), respectively. Such expectations for growth are attributable to healthy license business at the fintech security solutions arm and strong mobile OTP business, for which sales portion should climb to 40% within 2022. Backed by an anticipated expansion of sales at businesses boasting ample profit margins, OP growth should outpace sales increase moving ahead.
The company is also expected to benefit from one of the new government’s objectives—the introduction of mobile one-time password (OTP) for all banks. Aton is rapidly securing the largest market share for private mobile OTP, which is quickly replacing physical OTP due to its low issuance cost. Of note, brisk growth is also being witnessed for the frequency of mobile OTP usage. As the firm’s fee structure depends on number of uses, the profit contribution of the mobile OTP business is on the rise.
At the PASS certificate business, Aton’s other main growth axis, the number of issuances now tops 36mn, which is the highest among domestic private certificates. Although the portion of public sector application is high, we expect PASS to gradually begin contributing to overall profitability as the firm eases into charging for the service.
Offers valuation appeal following early-year share price adjustment
Aton shares are currently trading at a 2022E P/E of 15.5x, the most attractive valuation level among its peers in the fintech and security industries. The company is gaining steady ground in high-margin market segments such as mobile OTP and fintech security solutions licensing. Anticipating that its earnings will expand going forward in lockstep with ongoing fintech industry growth, we view Aton as warranting close investor attention.