Lablup faces valuation pressure after public subscription hits 3.55-to-1 ratio

AI infrastructure firm Lablup is set to list on the KOSDAQ on November 3 following a public subscription competition ratio of 3.55-to-1. The company faces pressure to prove its value as its expected market capitalization is 41 times its revenue from last year.

AI infrastructure software company Lablup recorded a single-digit competition ratio during its public subscription. The company faces increasing pressure to prove its corporate value following its listing, given an expected market capitalization that is 41 times its revenue from last year.

According to the lead manager NH Investment & Securities on the 23rd, Lablup's public subscription competition ratio was 3.55-to-1, with deposits totaling 73.5 billion won. The scheduled KOSDAQ listing date is November 3. This public offering is conducted by issuing 2.18 million new shares, and based on the finalized offering price of 19,000 won, the total offering amount is 41.4 billion won.

The offering price was determined at the bottom of the target range (19,000–22,000 won). During the demand forecasting held from the 13th to the 19th, 1,129 institutions participated, resulting in a competition ratio of 284.53-to-1. While 49.9% of the total requested volume offered prices below the bottom of the band, 39.1% offered prices at or above the upper limit.

The ratio of institutional investors applying for mandatory holding commitments was only 2.09% based on quantity. Out of the total requested volume of 446.59 million shares, the commitment volume was 9.33 million shares. The volume available for distribution immediately after listing is 5.172746 million shares, which is 35.51% of the total shares scheduled to be listed, valued at approximately 98.3 billion won based on the offering price.

The expected market capitalization is approximately 276.3 billion won. This is 41 times the 6.7 billion won revenue recorded last year and 28 times the 9.9 billion won expected revenue the company has presented for this year. The offering price was calculated using the Price-to-Earnings Ratio (PER) method based on an estimated net profit of 21.2 billion won for 2029. This means the corporate valuation heavily reflects expectations for future profitability improvements rather than current performance.

Consequently, the key factor after listing will be whether the company can translate its presented mid-to-long-term performance outlook into actual results. With the offering price set at the bottom of the target range, the market's evaluation of the corporate value will likely depend on future performance growth.

Lablup Business Analysis

Lablup is an AI infrastructure operating software company founded in 2015. Its flagship product, 'Backend.AI', is a platform that efficiently allocates and manages AI computing resources such as GPUs and NPUs. It supports companies and research institutions in dividing and utilizing their computing resources for multiple tasks, thereby increasing the operational efficiency of AI infrastructure.

The core technologies include virtualization technology that divides GPU resources to allocate them to multiple tasks, and scheduling technology that distributes computing resources according to workload. The company explained that in actual application sites, GPU utilization increased from 30% to 85%, and related budgets were reduced by 40%. It also highlighted its competitiveness in being able to integrally manage various AI accelerators such as NVIDIA, AMD, and Intel, and use them across multiple environments including its own servers and the cloud.

Revenue is generated from the sale of subscription-based and perpetual licenses for Backend.AI, as well as technical support services. In the first half of this year, the proportion of subscription-based license revenue was 55.52%, perpetual licenses were 35.10%, and technical support extensions were 8.33% on a consolidated basis. The structure allows for additional revenue when customers' GPU usage expands or contracts are renewed. According to the company, the proportion of recurring revenue last year was 94.7%, with the revenue base formed by contract renewals and usage expansion of existing customers.

Major customers include Samsung Electronics, Hyundai Mobis, KT, Shinhan Bank, and Samsung Seoul Hospital. The company stated it has supplied products to more than 120 sites domestically and abroad. It is also pursuing entry into global markets through a local subsidiary in the United States and overseas sales partners.

However, intensifying competition in the AI infrastructure market is a risk factor. As semiconductor manufacturers like NVIDIA and global cloud companies strengthen their own infrastructure management software, the competitiveness of independent platforms may weaken. If customers delay AI facility investments or expand the adoption of in-house solutions, it could affect new orders and the expansion of existing contracts.

Lablup Performance and Fund Usage Plan

Lablup's consolidated revenue for the first half of this year was 4.7 billion won, an increase of 58.2% compared to the same period last year, and operating profit recorded 600 million won. The operating profit margin was 11.8%, which is higher than last year's annual 10.1%.

Despite the operating profit, the net loss for the first half of this year reached 2.8 billion won. This was largely due to a 2.9 billion won loss on valuation of derivatives related to Redeemable Convertible Preferred Stock (RCPS) being reflected in financial costs. As these preferred shares were converted into common shares during the first half, the related financial liabilities were extinguished.

While operating cash flow in the first half of this year showed a net inflow of 300 million won, there were net outflows of 700 million won from investment activities and 100 million won from financing activities. Major causes of cash outflow include the acquisition of equipment and intangible assets and the repayment of lease liabilities. Cash and cash equivalents at the end of the first half were 9.6 billion won, a slight decrease from 9.7 billion won at the end of last year. Liquid funds, including 6 billion won in short-term financial instruments, are at the level of 15.6 billion won.

The financial structure improved due to the conversion of RCPS into common shares. Total liabilities decreased from 23.4 billion won at the end of last year to 5.6 billion won at the end of the first half of this year, and total equity turned from minus 2.3 billion won to a positive 15.2 billion won.

Lablup plans to invest the net proceeds of approximately 40.8 billion won from this offering into expanding AI infrastructure verification facilities and entering overseas markets. It has allocated 18.7 billion won for facility funds and 22.1 billion won for operating funds, which will be executed in stages from 2027 to 2029.

Facility funds will focus on establishing an AI accelerator test farm. The company plans to invest 14 billion won in a GPU test farm and 3.9 billion won in a heterogeneous NPU test farm to verify compatibility between various manufacturers' AI accelerators and its flagship product, Backend.AI. Additionally, it plans to spend 800 million won in 2028 to build a verification data center.

Operating funds will be used for global marketing and expanding overseas bases. 8.9 billion won is allocated to global marketing, and 8 billion won is allocated to operating overseas bases in the United States, Japan, and Singapore. Additionally, 4.1 billion won will be invested in R&D labor costs to promote product development and technological advancement.

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