Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Nearly 30 years of experience in the Korean/Asian equity research. Major sectors coverage include the following:
- Technology 
- Consumer 
- Special Situations/Deep Value Plays
- Tender Offers/M&As
- Holdcos/Stubs
- Asian Unicorns/Private Companies

Korea/Asia, Events, IPOs

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Myungshin Industrial IPO Valuation Analysis

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Myungshin Industrial IPO Preview - A Korean Hot Stamping Auto Parts Supplier to Tesla

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Equity Bottom-Up

Myoung Shin Industrial Co.,Ltd / Equity Bottom-Up

Myoung Shin Industrial Co.,Ltd (009900 KS)

Myoungshin Industrial (009900 KS) has been one of the hottest IPOs in Korea in 2020. It completed its IPO on 7 December at the IPO price of 6,500 won.  The stock price has surged nearly 7x in 11 trading days to 51,800 won as of 21 December. Its market cap has exploded to 2.1 trillion won ($1.9 billion). This surge is mostly driven by retail money and it reflects a retail madness of crowds in terms of FOMO (fear of missing out). Tesla's inclusion date for S&amp;P 500 index is on 21 December. We believe this is a significant date for Tesla as well as many of its suppliers such as Myoungshin Industrial as well as for the entire overall EV value chain. Although we do not claim to foretell how Tesla will perform post this date, we do believe there have been a big chunk of investors who have been positioning to buy Tesla and its related suppliers leading into this S&amp;P 500 index inclusion and selling them after the inclusion. Our high end case for Myoungshin Industrial assumed a net profit estimate of 45.7 billion won (an average of 2020 and 2021) and applied a 12.2x P/E (which is about 33% premium to the average P/E of the comps in 2020). At the current market cap of 2.1 trillion won, Myoungshin Industrial is trading at a 46x P/E using the high end of our net profit estimate of 45.7 billion won. Although Myoungshin Industrial has a solid technology for hot stamping products, is this really that special to warrant this very high valuation multiples? We do not believe so.

Myoungshin Industrial (009900 KS) has been one of the hottest IPOs in Korea in 2020. It completed its IPO on 7 December at the IPO price of 6,500 won.  The stock price has surged nearly 7x in 11 trading days to 51,800 won as of 21 December. Its market cap has exploded to 2.1 trillion won ($1.9 billion). This surge is mostly driven by retail money and it reflects a retail madness of crowds in terms of FOMO (fear of missing out). Tesla's inclusion date for S&amp;P 500 index is on 21 December. We believe this is a significant date for Tesla as well as many of its suppliers such as Myoungshin Industrial as well as for the entire overall EV value chain. Although we do not claim to foretell how Tesla will perform post this date, we do believe there have been a big chunk of investors who have been positioning to buy Tesla and its related suppliers leading into this S&amp;P 500 index inclusion and selling them after the inclusion. Our high end case for Myoungshin Industrial assumed a net profit estimate of 45.7 billion won (an average of 2020 and 2021) and applied a 12.2x P/E (which is about 33% premium to the average P/E of the comps in 2020). At the current market cap of 2.1 trillion won, Myoungshin Industrial is trading at a 46x P/E using the high end of our net profit estimate of 45.7 billion won. Although Myoungshin Industrial has a solid technology for hot stamping products, is this really that special to warrant this very high valuation multiples? We do not believe so. 

Myoungshin Industrial - Best Performing IPO in Korea in 2020 (Retail FOMO Madness of Crowds)