Neubility Innovations in Defense with AI Drone Exports

The limited impact on the market despite the rising interest rate trend can be attributed to two main factors. First, the market's continued positive betting on AI productivity supported investment sentiment. Second, the easing of the Middle East situation led to stable oil prices and expectations of lower inflation, providing relief to investors.

As big tech companies extensively build AI data centers and acquire companies, bond supply increases, leading to long-term interest rates not easily declining. This downward rigidity, coupled with the structure where AI must generate future profits to repay debt, further highlights the importance of the semiconductor industry. Ultimately, the importance of semiconductor sales has increased to generate AI profits.

When interest rates rise, the present value of money to be returned to customers in 10 years is discounted at a higher rate, reducing the valuation of liabilities. Furthermore, as the government shows a tendency to ease the insurance companies' surrender reserve system, the possibility of insurers expanding dividends increases, making it attractive from the perspective of enhancing shareholder value.

Neubility possesses the most experience and references in exporting AI drones in Korea. Recognizing this technological prowess, they received collaboration proposals directly from LIG Nex1 and Hanwha Aerospace. Neubility chose LIG Nex1 to participate in a rapid pilot program, where it obtained a technology score more than 10 points higher than other competitors in the project bid, demonstrating overwhelming technological superiority.

Unlike existing manned drones, Neubility's AI drones do not require a pilot. They are a fully autonomous AI strike system that moves independently to a target point based on coordinates received from radar networks via GPS and then intercepts it. This differentiates it from existing drone systems by resolving pilot training bottlenecks and enabling precise mission execution without human intervention.

In the Middle East, particularly in maritime defense systems like the Strait of Hormuz, it is difficult to visually observe all situations. Due to these environmental constraints, the importance of AI drones is greatly emphasized, and Neubility's AI drone exports are actively taking place, especially in Middle Eastern countries such as the UAE.

Neubility has proven its technological prowess by accumulating 8 years of accident-free performance in the field of drones for offshore wind power plant inspection. In maritime environments, GPS often disconnects, requiring drones to perform missions autonomously for 15 minutes. This allowed them to secure autonomous flight technology in such extreme conditions. Based on these offshore wind drone references, they entered the defense drone market, diversifying their business model into attack and defense drones.

This creates a platform-like structure, similar to car navigation systems, which, once built, establishes high barriers to replacement through the creation of a proprietary communication network. Neubility's core competitiveness lies in its top-tier, pilot-free AI autonomous flight technology.

Iran's Shahed drones are very inexpensive and operated in large numbers. Intercepting all of them with missiles creates a significant cost-effectiveness problem. While the interception rate of manned drones in the Middle Eastern tactical environment is only 2-5%, AI autonomous drones can achieve an accuracy rate of over 90%. Consequently, the latest defense trend, 'drones to catch drones,' has led to a focus on the AI drone market.

Despite only two years in the defense sector compared to eight years in offshore wind power plant inspection, it showed rapid results. It successfully won one out of three bids in the first half of the year, and about 20 projects are under discussion for the second half. This is expected to improve the temporary deficit structure caused by increased selling, general, and administrative expenses.

Neubility secured hardware competitiveness by using NVIDIA's AI chips. Particularly, in line with the trend of strengthening regulations on Chinese components, such as the US pushing to ban DJI drones, it avoids using Chinese components and has localized 100% of its parts with domestic technology. This enables entry into the US market, meets high security requirements, and provides an opportunity to preemptively benefit from DJI sanctions.

The attack drone, 'Zaiden,' is a squadron system composed of 1 command drone and 9 kamikaze drones. The command drone, equipped with high-performance equipment such as camera sensors, directs the entire operation. Upon receiving a kamikaze order, one of the 9 kamikaze drones charges towards the target, following an organic attack method.

It is crucial to efficiently manage operating expenses, such as employee stock compensation costs, while maintaining revenue growth. In the second quarter, it achieved a backlog of 16 billion won in the defense sector, raising expectations for a turnaround to profitability.

Neubility established a key partnership by collaborating with LIG Nex1 in Korea's rapid defense pilot project. It is actively exporting to the Middle Eastern market together with LIG Nex1, while also discussing business independently with Middle Eastern countries, thereby securing independent competitiveness. This allows it to achieve a 45% profit margin, pursue business on an equal footing, and even consider future integration with ground weapons.

When investing in Neubility, caution is advised regarding the remaining lock-up shares. Approximately 10% of the shares are subject to a 1-month lock-up, which could lead to increased stock price volatility upon their release. It is necessary to carefully determine the entry timing by comprehensively considering the current stock price, which is significantly lower than the public offering price, and the supply and demand situation.

The cost burden incurred from initial personnel investment and setup costs is expected to gradually decrease as the order backlog increases. Currently, Neubility's market capitalization is approximately 170 billion won.