[Click eStock] "ITCEN Entech: 42.7 Billion KRW Net Profit Over 4 Quarters, PER at 1.7x... Extremely Undervalued"

ITCEN Entech has achieved a turnaround in performance, driven by improved profitability in its core business and subsidiaries. However, analysts point out that these changes have yet to be properly reflected in its share price. Despite recording an accumulated net profit of 42.7 billion won over the most recent four quarters, its price-earnings ratio (PER) stands at just 1.7 times, highlighting its undervaluation.

Independent research firm ValueFinder stated on August 18 that, considering the recent improvement in profitability, the current share price level of ITCEN Entech represents an extremely undervalued range.

In the second quarter of this year, ITCEN Entech reported consolidated revenue of 138.8 billion won, up 8.6% year-on-year. Operating profit soared by 469% to 8.3 billion won over the same period. Cumulative revenue for the first half of the year reached 274.7 billion won, up 14.6% compared to the previous year, while operating profit rose by 1,563% to 15.3 billion won. Net profit, which was in the red in the first half of last year, turned positive, reaching 16.4 billion won.

On a trailing-four-quarter basis, the company posted operating profit of 35.3 billion won and net profit of 42.7 billion won. As of the closing price on August 14, its market capitalization stood at approximately 71.5 billion won. In comparison with net profit, the PER is only 1.7 times.

The rebound in earnings was led by improved profitability in the core business. On a standalone basis, first-half revenue was 157.2 billion won, up 17.4% year-on-year, and operating profit was 13.3 billion won, up 78.6%. The operating margin climbed to 8.5%.

ValueFinder noted that a shift toward selective bidding, focusing on high-profit projects, and productivity gains in development through artificial intelligence (AI) ultimately improved cost competitiveness.

Subsidiaries that previously dragged down performance have also returned to profitability. ITCEN Clouit reported a net loss of 6.9 billion won in the first half of last year, but secured a net profit of 2.1 billion won in the first half of this year. Operating profit in the IT services business also saw dramatic improvement, swinging from a loss of 2.5 billion won to a profit of 14.7 billion won in the same period.

Cloud-related business growth continues as well. In the first half of the year, cloud segment revenue reached 96.7 billion won, up 21.8% year-on-year, while its proportion of total revenue expanded to 35.2%.

However, the artificial intelligence transformation (AX) business is experiencing a temporary lull following the end of a major project. On a standalone basis, first-half AX revenue amounted to 2.2 billion won, a sharp drop from last year's 15.4 billion won, largely due to the 52.6 billion won completion of the “AI Customized Teaching-Learning Platform and Academic Diagnosis System” project in the previous year.

Nonetheless, the foundation for AX business growth continues to solidify. The company’s proprietary small language model (sLLM) development solution, "IntelliCEN Code," was applied to more than 10 projects in the public and financial sectors during the first half of the year, and its subsidiary's AI Agent Platform, "AgentGO," is expanding its track record in the pharmaceutical, manufacturing, and financial fields. In June, ITCEN Entech also acquired ITCEN Clouit's public cloud division, consolidating AX and customer experience (CX) capabilities within the headquarters.

Base performance is also largely secured. In January, the company won a 15.3 billion won contract for judicial data center maintenance, followed by a 47.9 billion won contract for integrated information systems maintenance in June.

Ultimately, orders for public informatization projects in the second half are expected to be the key variable for further performance improvement. After the completion of the large-scale AX project, the company’s ability to secure follow-up projects will likely determine the scale of next year’s profit.

Woo Bin Jeon, ValueFinder analyst, said, "ITCEN Entech recorded net profit of 42.7 billion won over the past four quarters, yet its market capitalization is only 71.5 billion won and the PER stands at 1.7 times, indicating an extremely undervalued phase."

He added, "With the core business operating margin now in the 8% level and even previously underperforming subsidiaries returning to profitability, overall profitability has risen to a new level. If follow-up public AX projects are secured during the second half, record-breaking results are possible."

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