Atec, Steady Performance but Lacks Growth Momentum...

PC Public Procurement No.1... Annual Sales of 100 Billion KRW
Financial Structure is Strong but... New Growth Engines Needed

Although the election to choose the next president is still 1 year and 8 months away, speculative funds betting on leading presidential candidates are rapidly increasing in the domestic stock market. The stock price volatility of political figures ranking high in the '2022 presidential candidate approval ratings,' such as Lee Nak-yeon, a member of the Democratic Party of Korea, and Lee Jae-myung, Governor of Gyeonggi Province, has also increased. Stocks related to Lee Jae-myung, whose approval rating surged following the Supreme Court's acquittal ruling, such as ATEC, Hyungji Elite, and Susan INT, have risen sharply. Asia Economy aims to examine the business performance and financial stability of political theme stocks.

[Asia Economy Reporter Yoo Hyun-seok] ATEC is attracting investors' attention as a Lee Jae-myung theme stock, but it is a solid company independently. Centered on the stable public procurement PC market, it generates annual sales of around 100 billion KRW and has retained earnings of 80 billion KRW. However, since its core business is stagnant, additional growth can be expected only by finding new growth engines.

ATEC was established in July 1993. It was listed on the KOSDAQ market in May 2001. In 2015, it spun off its transportation card solution business to establish ATEC TN. The largest shareholder of both ATEC and ATEC TN is CEO Shin Seung-young, holding 26.80% and 29.20% of shares, respectively. CEO Shin is known to have served as an operating committee member of the 'Seongnam Creative Management CEO Forum,' a public-private consultative body created when Lee Jae-myung was mayor of Seongnam. Because of this, ATEC and ATEC TN are considered Lee Jae-myung theme stocks.

ATEC supplies LCD all-in-one PCs to public and educational institutions, including the National Assembly, courts, and the Blue House. Its main market is the public and procurement market, not the consumer market. Generally, the PC market's peak seasons are winter and spring, as consumers rush to purchase PCs before school starts or admissions. However, ATEC's situation slightly differs because its main market is public procurement, which is more influenced by government budget allocation and execution.

In the public procurement PC market, ATEC, Sambo Computer, and Daewoo Lucoms are considered the top three companies. Among them, ATEC held a 16.9% market share in the overall public institution PC procurement market last year based on sales amount. In the first quarter of this year, it recorded 21.8%, achieving first place in the industry.

The public institution PC market is a market where large companies' entry is restricted, and replacement demand steadily occurs. This forms the foundation for ATEC to achieve stable sales. Based on individual financial statements, ATEC recorded sales of 106.3 billion KRW and operating profit of 4.2 billion KRW in 2017. In 2018, sales were 98.2 billion KRW with an operating profit of 3.6 billion KRW, and last year, sales reached 99.2 billion KRW with an operating profit of 4.4 billion KRW.

This year's first quarter showed significant growth, breaking the previous stagnation. It recorded sales of 30.1 billion KRW and operating profit of 2.6 billion KRW, representing a 22.45% increase in sales and a 51.79% increase in operating profit compared to the same period last year. This is attributed to the replacement demand for Windows 10 following the end of Windows 7 security support on January 14, which caused a significant increase in desktop PC shipments in the public sector from last year through the first quarter of this year. However, this sales increase is temporary due to replacement demand, so continuous sales growth is difficult to expect.

Therefore, it is analyzed that new growth engines must be found to grow further. The public institution PC market, which is the main focus, is stagnant. According to Korea IDC, domestic desktop PC shipments in the public and education sectors were 492,000 units and 319,000 units, respectively, last year, representing increases of 69.1% and 50.1% compared to the previous year. However, these increases were also due to Windows 10 replacement demand. In 2017 and 2018, shipments in the public sector were 305,000 and 308,000 units, and in the education sector, 239,000 and 212,000 units, respectively. The market ATEC focuses on remains around 500,000 units annually.

The financial structure is excellent. As of the first quarter, ATEC's retained earnings reached 85.8 billion KRW, an 18.01% increase from 72.7 billion KRW in 2017. Additionally, the debt ratio is 33.8%, and short-term borrowings account for only 1.6%.

This content was produced with the assistance of AI translation services.