[Click e-Stock] "Genian Delivers First-Quarter 'Earnings Surprise'... AI and Security Growth Expected to Accelerate"

Genian, a domestic cybersecurity company, has continued its growth momentum by posting first-quarter results for this year that far exceeded market expectations. The increase in security demand due to the spread of artificial intelligence (AI) and the government's strengthened information protection policies are expected to sustain this trend of improved performance.

On May 18, Park Jongseon, a research analyst at Eugene Investment & Securities, stated in a report, "Profitability improved significantly year-on-year, creating an earnings surprise."

According to Genian's consolidated financial results for the first quarter of this year, revenue reached 11.7 billion won, up 25.5% compared to the same period last year. Operating profit surged to 1.7 billion won, a 4,670.8% increase, marking the highest first-quarter performance in the company's history. This figure is well above market consensus, which expected revenue of 10.3 billion won and operating profit of 500 million won.

Park analyzed, "Achieving the highest-ever first-quarter revenue during a traditionally slow season, along with improved profitability, is a positive sign," adding, "Network security products and service products increased by 27.5% and 16.5% year-on-year, respectively, driving performance growth."

He explained that, in particular, growth in existing product lines such as NAC (Network Access Control) and EDR (Endpoint Detection & Response), as well as expansion of service-based security business customers for cloud NAC and MDR (Managed Detection and Response), contributed to the improved results. Securing customers for new home network security products and integrated vaccine·EDR solutions was also cited as a positive factor. The company’s cumulative global customer count has surpassed 200.

The improvement in profitability was also notable. The operating margin increased by 14.4 percentage points, from 0.4% in the first quarter of last year to 14.8% in the first quarter of this year.

The growth trend is expected to continue in the second quarter as well. Eugene Investment & Securities estimates Genian’s consolidated revenue for the second quarter of this year at 12.9 billion won and operating profit at 1.8 billion won, representing year-on-year increases of 12.9% and 73.5%, respectively.

Park explained, "The reason for our expectations of stable performance growth is attributable to favorable domestic and international policies, as well as the company's internal business strategies."

He stated, "Due to the AI ‘Mythos’ issue, demand for integrated defense systems combining NAC, EDR, and ZTNA is increasing. Additionally, regulations are being strengthened to raise the penalty for hacking incidents up to 10% of revenue."

Expectations are also rising for government policy benefits. With the government emphasizing the importance of cybersecurity within its AI strategy and announcing the 'Second Comprehensive Information Protection Plan' this January, it is expected that investment in information protection will accelerate in earnest.

On the corporate side, the company is also strengthening its shareholder return policies. Genian announced plans to enhance corporate value and introduced a predictable and continuous dividend policy. The company aims to maintain an average dividend payout ratio of 20-25% over the next three years.

Additionally, it is pursuing an endpoint security platform strategy integrating vaccine and EDR, strengthening subscription-based services and managed business, and expanding into the global market with cloud-based offerings.

Its valuation appeal is also being highlighted. The current share price is trading at a 2024 forecasted price-to-earnings ratio (PER) of 11.8 times, which is significantly discounted compared to the domestic industry average of 41.4 times.

Park stated, "Amid expanding domestic and global cybersecurity demand, the improvement of business fundamentals and the expansion of global business, based on new products and next-generation growth engines, are expected to continue. With expectations for performance growth and improved profitability, the share price may shift to an upward trend."

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