In today’s briefing:
- Top Material IPO Valuation Analysis
- Lotte Chemical Close to Acquiring Iljin Materials
- Minority Shareholders Convince DB Hitek to Stop a Company Split
- Caregen (214370 KS): Business Recovery Backed by Strong Global Demand; New Products Brighten Outlook
Top Material IPO Valuation Analysis
- Our base case valuation of Top Material (360070 KS) is a target price of 37,965 won per share, which is 33% higher than the mid-point of the IPO price range.
- Given the solid upside, we have a Positive view of the IPO. Our base case valuation is based on 25.6x P/E using our estimated net profit in 2022.
- We estimate the company to generate sales of 73.7 billion won (up 131.1% YoY) and operating profit of 14.1 billion won (up 190.3% YoY) in 2022.
Lotte Chemical Close to Acquiring Iljin Materials
- On 27 September, it was announced that Lotte Chemical (011170 KS) is close to acquiring a 53.3% stake in Iljin Materials (020150 KS) for about 2.7 trillion won (US$1.9 billion).
- Iljin Materials has relatively high valuation multiples. Despite recent share price decline, its shares are trading at 32.4x P/E and 15.7x EV/EBITDA in 2022.
- At such a high valuation premium (93% higher than current prices), there are going to be significant concerns that Lotte Chem may have overpaid for this acquisition.
Minority Shareholders Convince DB Hitek to Stop a Company Split
- On 26 September, DB Hitek Co., Ltd. (000990 KS) announced that it will stop the proposed split-off of its semiconductor design business.
- This move to stop the company split comes after numerous minority shareholders banded together to stop this move which could have a negative impact on DB Hitek.
- Overall, we believe DB Hitek’s decision to stop the company split driven by the campaigns from the minority shareholders is likely to have a positive impact on the company.
Caregen (214370 KS): Business Recovery Backed by Strong Global Demand; New Products Brighten Outlook
- Caregen Co Ltd (214370 KS) is a niche biotech company, with focus on biomimetic peptide-based cosmeceuticals and medical devices targeting anti-aging industry. The company has a large addressable market opportunity.
- Despite the negative impact from the re-spread of COVID-19, Caregen reported 4% y/y growth in total revenue in H1 2022, with operating profit margin expanding 260bps.
- Caregen’s COVID-19 nasal spray is in phase 1 trial. FDA has registered Caregen’s health functional food to control blood sugar as a new dietary ingredient (NDI).
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