[Click eStock] "Samsung SDS Acquires Emro... Strengthening Mid- to Long-Term Competitiveness"

Hyundai Motor Securities Report

Hyundai Motor Securities analyzed on the 16th that Samsung SDS is expected to see an improvement in IT service profit margins in the second half of the year due to high growth in cloud and IDC (Dongtan HPC Center commencement). The investment opinion was maintained as Buy, with a target price of 160,000 KRW.

Hyun-Yong Kim, a researcher at Hyundai Motor Securities, evaluated, "Although the deal size of Samsung SDS is disappointing, it is positive as a signal of the start of full-scale M&A."

Samsung SDS decided the day before to acquire a 33.4% stake (3,744,064 shares) in supply chain management software company Emro for 111.8 billion KRW (29,862 KRW per share). In addition, it also decided to take full responsibility for an additional investment of 16.5 billion KRW, including 9.5 billion KRW in bonds with warrants (369,405 shares at 25,717 KRW per share) and 7 billion KRW in convertible bonds (272,193 shares at 25,717 KRW per share).

Accordingly, upon full dilution, Samsung SDS is expected to ultimately secure a 37% stake in Emro. Emro is the leading company in the domestic supply chain management software market, holding about 35-40% market share. The acquisition of the number one domestic company is judged to strengthen the mid- to long-term competitiveness of the Software as a Service (SaaS) business.

Researcher Kim explained, "This acquisition is expected to strengthen the mid- to long-term competitiveness of Samsung SDS's SaaS business," adding, "Emro has a track record of supplying its solutions across almost all domestic industrial sectors, and its expected sales for 2022 are between 55 billion and 60 billion KRW, with an operating profit margin in the low teens, which corresponds to about 5% of Samsung SDS's cloud business division sales."

He evaluated, "With this acquisition, SRM (Supplier Relationship Management) is added to existing enterprise solutions such as ERP and MES, making the business portfolio even stronger."

The total deal size is 128.3 billion KRW, which is considerably less than market expectations that had hoped for deals in the trillion KRW range, considering Samsung SDS's net cash of 5 trillion KRW (55% of current market capitalization), but it is regarded as a meaningful signal of M&A activity.

He added, "The deal aligns with the M&A direction of strengthening cloud and digital logistics businesses, and the management's strong willingness for additional deals is positive."

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