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The author is an analyst of NH Investment & Securities. He can be reached at — Ed.

M2I Corp is a specialized smart factory solutions provider. Key investment points include: 1) localization of its HMI solution; 2) customer diversification; 3) sales growth for its smart SCADA solution; and 4) strong valuation merit compared to its peers.

Serves as gateway to connect production equipment with main systems

Standing as a specialized smart factory solutions provider, M2I Corporation boasts such core products as its smart human-machine interface (HMI) and smart supervisory control and data acquisition (SCADA) solutions, which serve as gateways to connect production equipment with main systems (MES/ERP).

M2I Corp’s solutions are essential for the construction of smart factories. Based on its strengths in general-purpose use and customization, the firm has established itself as a number-one play in the semiconductor and display-related smart factory solutions market. In addition, its rich track record has allowed the company to secure clients from a diverse range of industries (eg, rechargeable battery and pharmaceutical/bio).

Offers earnings growth, valuation appeal, and robust financials

Backed by the localization of HMI products, effects of client diversification, and strong prospects for the full-fledged generation of smart SCADA/solution sales (2022E W1.6bn → 2023F W7.3bn), M2I Corp should enjoy accelerated earnings growth from this year. For 2023, we forecast sales of W59.5bn (+43.2% y-y) and OP of W19bn (+67.0% y-y; OPM of 31.9%).

M2I Corp’s shares are trading at a 2023F P/E of 10.4x, a level much lower than the average P/E of 31.6x for its smart factory-related peer group. Considering its robust financial structure (debt ratio of 12% and 2022E net cash of W26.9bn), strong growth potential (2023F OP growth of 67% y-y), and solid profitability (2023F OPM of 31.9%), we view the firm’s shares as being excessively undervalued compared to those of peers.

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