The author is an analyst of Shinhan Investment Corp. He can be reached at [email protected]. — Ed.
Client base expands alongside growing demand for SCM solutions
Increased volatility in global supply chains and efforts to reinforce ESG (environmental, social, and governance) management are driving up demand for cloud-based supply chain management (SCM) solutions. Cloud services are largely divided into: 1) private SaaS (software as a service), developed in consideration of the corporate environment of a large enterprise and its affiliates; and 2) public SaaS, which provides support for the management of electronic contracts/signatures and target costs. The cumulative number of clients using EMRO’s cloud-based SCM solutions rose from 35 in 2020 to 84 in 2021, and currently stands at 98 vs. the company’s target of 120 for 2022. Along with clientele expansion, the sales share of cloud services rose from 3.5% in 2020 to 8.2% in 2021 and is expected to reach 13.3% in 2022.
On track to achieve annual goals set for 2022
Following recent financial scandals, demand is on the rise for adoption of SCM solutions to strengthen internal compliance and enhance transparency from the procurement process. In 1H22, EMRO set up comprehensive next-generation purchasing systems for Hyundai Genuine and Hyundai Oilbank, and added Fubon Hyundai Life Insurance, Yanolja and SFA Engineering to its client list for cloud-based SCM solutions. EMRO is also working with Woori Bank to create a digital supply chain platform named One Biz Plaza, which builds on EMRO’s technologies to facilitate purchasing between member companies. The new platform is set for official launch in September.
After reporting an order backlog of KRW24bn for 1Q21, EMRO generated annual sales of KRW47bn in 2021. With order backlog reaching KRW42.1bn as of 1Q22, the company appears on track to achieve 20-30% YoY growth in sales for full-year 2022 as expected at the start of the year.
Biggest beneficiary of industry growth with solid market lead
Given its low customer churn, securing new clients from various industries is the key to growth for EMRO. Alongside the increase in sales, the company’s employee count has expanded from 210 in 2020 to 256 in 2021 and 277 in 2Q22. Further workforce expansion is expected to be limited as the company has finished hiring most of the key personnel needed for its new businesses. Considering that employees are the most important assets of a software company, the expected increase in EMRO’s stock-based compensation expenses to KRW1.5bn this year is seen positive.
The COVID-19 pandemic helped to raise the awareness of domestic companies on the importance of SCM and increase demand for the adoption of SCM solutions. With the domestic market for SCM solutions still in its early phase of growth, EMRO should continue to benefit from market growth backed by its unrivalled leadership.
