LS Securities projected on the 4th that Suprema, which operates an integrated security system business, will secure solid demand as smart building growth continues. LS Securities has newly set a buy rating on Suprema with a target price of 51,000 won, which is 57.4% higher than the previous day's closing price of 32,400 won.
Suprema has been launching AI-based products since introducing its artificial intelligence (AI) facial recognition product in September 2020. The proportion of AI-based products in Suprema's total sales also increased from 7.3% in 2020 to 43% in 2024. During the same period, Suprema's gross profit margin (GPM) improved from 58.8% in 2020 to 65.1% in 2024, thanks to the average selling price (ASP) of AI-based products being twice that of other products.
Jeong Woo-sung, a researcher at LS Securities, forecasted that sales of Suprema's AI-based security-related products will remain steady. He noted that "the reason for the increasing proportion of Suprema's AI-based revenue is due to the expanding trend of reconstruction investment in North America and Europe, ongoing smart city construction projects in the Middle East, and the transfer of production bases to India, all contributing to the global smart building market expansion," adding, "because Suprema's AI-based products are a key component of the security systems in smart buildings."
Jeong evaluated positively the fact that Suprema is planning to develop crime prevention solutions and physical security solutions based on video recognition technology. He said, "Suprema will enter the physical security business using AI based on its AI access control business," and noted that "the speed may increase depending on the trend of mergers and acquisitions (M&A) in the security sector involving Suprema."
Jeong determined that Suprema's current stock price does not reflect its growth performance. He cited the basis for the target price of 51,000 won as follows: ▲Even assuming no growth, Suprema's free cash flow (FCF) was 19.8 billion won last year, indicating a value of around 200 billion won; ▲As of the end of June this year, it holds 55.8 billion won in net cash; and ▲It is expected to see performance growth due to the expansion of the smart building scale in the future.