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Pivoting back to core strengths

Withdrawal from online-only bank race: An unexpected but prudent move

Ahead of the Mar. 26 application deadline for Korea’s fourth online-only bank license, the Douzone Bizon-Shinhan Bank consortium (which had been viewed as the strongest contender) announced that it would not participate. Douzone Bizon likely concluded that expanding into financial services via an online-only bank would carry more risks than rewards and not align well with its broader strategic direction. Indeed, entering the industry as a latecomer would have required massive expenditures (hundreds of billions of won) and exposed the firm to business risks stemming from growing political uncertainty. With the withdrawal, it can better focus on core businesses without eroding profitability. Thus, while the decision may lead to heightened share price volatility in the near term, we view it as a net positive.

Likely to expand data-driven financial services by leveraging ERP data

Importantly, Douzone Bizon’s withdrawal from the online-only bank race does not mean that it is abandoning its attempt to enter the financial services sector. Rather, it will likely take a more measured approach. The company''s key competitive advantage lies in its cloud-based enterprise resource planning (ERP) platform, which collects and manages corporate financial data. By leveraging ERP data, the company can integrate services such as loan screening, insurance/card product underwriting, account transfers, and payments into its platform. Indeed, the company plans to expand its ERP features to include financial services by partnering with financial institutions. This approach aligns with the growing global move toward data-driven financial platforms.

Lower TP to W84,000, but maintain Buy

For 2025, we look for consolidated revenue of W450bn (+12% YoY), operating profit of W104bn (+18% YoY), and OP margin of 23.1% (26.7% on a standalone basis; +3.4%p YoY). While the dissipation of internet-only bank expectations could drive near-term volatility, we believe Douzone Bizon can now better focus on its core businesses without eroding profitability. The firm has established itself as a leading domestic AI player by generating tangible results with OneAI, and the share of cloud revenue is expected to exceed 50% by 2026 on accelerating cloud adoption among Standard and Extended ERP customers. Moreover, the current pullback looks excessive in light of the stock’s five-year average forward P/E (33x) and the average P/E in 2019-21 (46x), when the company expanded into the financial services and cloud segments. We lower our target price by 21% from W106,000 to W84,000 (based on 12-month forward P/E of 38x), reflecting profit-taking following the earnings surprise reported in January and deteriorating global software sentiment. However, we maintain our Buy rating continue to recommend the stock as our top pick. We expect 1Q25 earnings to provide momentum for a full-fledged rebound.