[Click eStock] "S-1's Profitability Declined in Q2... Growth Strategy Needed"

[Asia Economy Reporter Myunghwan Lee] Hi Investment & Securities announced on the 2nd that it maintains a buy rating on S-1 but lowers the target price from the previous 95,000 KRW to 75,000 KRW. The reason is a downward revision of earnings estimates due to increased costs such as labor expenses.

S-1's consolidated sales for the second quarter of this year recorded 625.5 billion KRW, up 7.4% year-on-year, and operating profit was 53.3 billion KRW, down 12.3%. Hi Investment & Securities pointed out that sales increased due to growth in the system security sector and expansion of management scope in integrated solutions and building management sectors due to an increase in new business sites. However, despite the sales increase, profitability declined due to increased selling and administrative expenses caused by rising labor costs.

Hi Investment & Securities expects S-1's consolidated sales for this year to increase by 7.5% year-on-year to 2.4854 trillion KRW, and operating profit to grow by 12.8% to 202.7 billion KRW. This is because the number of subscribers in the system security sector is increasing and being maintained, and the service provision scope of integrated security is expanding. The building management sector is expected to contribute to sales growth this year as the management scope expands due to an increase in new business sites. It is also expected that profitability this year will improve compared to last year due to the base effect of one-time costs such as special incentive payments and workforce structure improvements last year.

Hi Investment & Securities analyzes that S-1 will visualize growth potential through smart building management solutions. 'BlueScan,' launched by S-1 in September last year, is a solution that combines sensor technology and building management know-how. By attaching IoT-based sensors to key facilities of buildings to check for abnormalities, remote building security operations are possible. Hi Investment & Securities pointed out that this solution can enable building management such as security operations with minimal personnel, thus expecting labor cost reduction effects.

Researcher Sangheon Lee of Hi Investment & Securities said, "S-1 is growing continuously and stably, but in a situation where the absolute level of costs such as labor expenses has increased, it needs to pursue profit growth through greater sales growth," adding, "Since cost levels have risen, a bigger growth strategy is needed at this time."

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