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Gaining ground in the ESL market

Valuation gap with VusionGroup to narrow

VusionGroup, the global leader in the electronic shelf label (ESL) market, is garnering a 42% premium over global peers (average) and a 185% premium over SoluM (based on 2024F P/E), as the company has secured long-term growth momentum by winning large-scale orders from Walmart (Apr. 2023). SoluM is trading at a 12-month forward P/E of 9.3x, 48% below the global peer average and 64% below VusionGroup. However, we expect the valuation gap to narrow going forward, as SoluM is likely to win large-scale orders and gain market share.

North America to drive ESL market growth

The ESL market has a robust growth outlook, as: 1) ESL penetration in global retail channels is estimated at less than 10%; and 2) ESL solutions are seeing growing adoption in developed markets amid efforts to reduce labor costs. While the growth of the ESL market was initially centered on France, we believe the US will drive market growth going forward.

4Q23 preview: Below-consensus OP

For 4Q23, we expect SoluM to post revenue of W327.3bn (-21.5% YoY) and operating profit of W14.5bn (-12.2% YoY).