[IPO] ModelSolution, the Reason Behind Increasing Corporate Value from 90 Billion to 170 Billion Won in 4 Years

Woo Byung-il, CEO of Model Solution. / Photo by Model Solution

[Asia Economy Reporter Jang Hyowon] Advanced prototype manufacturing company Model Solution is knocking on the door of the KOSDAQ market. Model Solution was acquired by the Hankook Tire Group in 2018 for approximately 92 billion KRW, and if the public offering price is set at the upper end of the desired band in this IPO, it is expected to be valued at about 172 billion KRW.

On the 15th, Model Solution held a press conference in Yeouido, Seoul, to introduce the company ahead of its listing. The largest shareholder of Model Solution is Hankook Tire & Technology, currently holding 75% of the shares. Hankook Tire & Technology acquired 75% of Model Solution’s shares in May 2018 for 68.9 billion KRW, valuing the company at approximately 92 billion KRW.

For this IPO, Model Solution’s desired public offering price range is 24,000 to 27,000 KRW per share. The expected market capitalization after listing is between 152.8 billion and 172 billion KRW. If the offering price is set at the upper limit, Model Solution’s corporate value will have increased by about 87% in roughly four years.

Regarding this, Model Solution explained that its business scope has expanded and profitability has improved compared to when it was acquired by Hankook Tire & Technology.

A Model Solution representative said, “At the time of acquisition in 2018, there was no design or functional prototype division, and the CM business we are currently entering did not exist. Also, in 2017 before the acquisition, the operating profit margin was about 8%, but after acquisition, it was raised to around 14%, improving profitability.”

On a consolidated basis, Model Solution recorded sales of 50.9 billion KRW and operating profit of 4.1 billion KRW in 2017, with an operating profit margin of 8%. In 2018, the year it was acquired by Hankook Tire & Technology, sales reached 56.2 billion KRW and operating profit 8.6 billion KRW, raising the operating profit margin to the mid-teens percentage. The company has maintained a similar level of operating profit margin since then. Last year, sales were 61.1 billion KRW and operating profit 8.9 billion KRW, with an operating profit margin of 14.6%.

A Model Solution official added, “There is no domestic listed company with the same business model, so we set overseas companies as comparable peers when determining the public offering price. To propose a reasonable offering price, we applied a discount rate of about 40% to the desired price range.”

Model Solution operates mainly in manufacturing and small-volume mass production services of ▲design prototypes ▲functional prototypes ▲injection molding prototypes, which are necessary in the product development stages of various high value-added industries such as automotive, aerospace, IT & telecommunications, and medical devices.

The new product development stages are divided into research and development (R&D) → design and engineering → prototype development → mass production → marketing and distribution sales. The prototype value chain covers from design to prototype development, which is further divided into PoC prototype → design and functional prototypes → QDM (quick die making) and injection molding.

Model Solution operates in high value-added businesses requiring ultra-precision technology, such as design and functional prototype manufacturing and QDM and injection molding, excluding the low value-added PoC prototype. As of the end of last year, the sales composition was 46.6% QDM, 44.8% design prototypes, and 8.6% functional prototypes.

After listing, Model Solution plans to expand its CM division. CM is a production solution business that undertakes product development to semi-finished and finished product manufacturing on behalf of clients lacking manufacturing capabilities. To this end, the CM business unit has been separated and strengthened, with facilities established in Bucheon.

Additionally, Model Solution plans to secure startups in advanced industries as customers by creating a startup accelerating program. Since Model Solution can handle everything from development to production if the idea is innovative, combined with financial investor (FI) participation from the parent company, an incubating system will be established.

Woo Byungil, CEO of Model Solution, emphasized, “We are not a manufacturing company but a designer company that can identify and observe hardware trends first. After listing, we will leverage our strengths in the design sector to become a global company capable of creating innovative products.”

Meanwhile, the total number of shares offered in Model Solution’s IPO is 1 million shares. Based on the upper limit of the offering price, the company will raise 27 billion KRW. Institutional investor demand forecasting will be conducted over two days on the 19th and 20th to finalize the offering price, followed by general subscription on the 26th and 27th. The listing on KOSDAQ is scheduled for next month, with KB Securities as the lead underwriter.

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