[Funding] PHC①, Life-or-Death New Factory Establishment

Raised 56.1 Billion KRW Through Rights Offering
0.49 New Shares Allocated Per 1 Existing Share...Major Shareholder Participates in 50% of Allocation
Built Diagnostic Kit Production Plant with 41 Billion KRW Investment

[Asia Economy Reporter Hyungsoo Park] PHC, which saw a surge in sales last year by distributing COVID-19 diagnostic kits, has embarked on building a large-scale diagnostic kit production factory. This investment is in preparation for a sharp increase in orders for COVID-19 diagnostic kits and specimen collection kits.

According to the Financial Supervisory Service's electronic disclosure system on the 22nd, PHC will invest 41 billion KRW to establish a diagnostic kit factory, aiming for completion by June next year. It will spend 11 billion KRW to acquire land with a total area of 40,000㎡, 24 billion KRW to construct the factory, and 6 billion KRW to purchase and install machinery and equipment.

PHC distributes COVID-19 antigen diagnostic kits such as 'Gmate COVID-19', rapid antigen diagnostic kits 'Gmate COVID-19 Ag', specimen collection kits 'Gmate UTM', and blood glucose meters. Last year, sales by major product categories were 12 billion KRW for specimen collection kits, 5.1 billion KRW for blood glucose meters, and 4.2 billion KRW for distributed clothing. Total sales last year reached 25.1 billion KRW, a 167.5% increase compared to 9.4 billion KRW the previous year. Operating profit turned positive at 180 million KRW.

PHC purchases its main revenue product, COVID-19 specimen collection kits, from its affiliate Philosis and distributes them. PHC explained that the unit price of COVID-19 diagnostic kits and specimen collection kits varies depending on production volume, and prices may fluctuate based on Philosis's production capacity. By establishing its own factory to produce products independently, it expects to lower production costs and improve profitability. Although there are concerns that demand for diagnostic kits may decline due to COVID-19 vaccinations, the diagnostic kit market still has demand exceeding supply.

Despite concerns that demand for COVID-19 diagnostic kits may decrease after vaccinations, PHC's board of directors decided on bold facility investments. They will build not only independent COVID-19 diagnostic kit production facilities but also production facilities for consumable general medical devices such as specimen collection kits. They also plan to expand product lines through research and development (R&D).

PHC will raise funds for the facility investment through a rights offering to shareholders. For every one existing share, 0.49 new shares will be allocated. The planned issue price for the new shares is 1,475 KRW, and it is expected to raise a total of 56.1 billion KRW. The remaining 14 billion KRW after investing in the factory will be used for raw material purchases. The largest shareholder, M Consulting, will invest in about 50% of the allocated shares.

Operating the factory will also increase fixed costs. Therefore, if the demand for diagnostic kits declines faster than expected, PHC's profitability deterioration is inevitable. The company cautioned in its securities registration statement that if the new factory does not generate an appropriate level of profitability, a liquidity crisis may arise.

This content was produced with the assistance of AI translation services.