Will LS Materials Overcome the Burden of European Sales and Succeed in Its IPO?

Ultra Capacitor Manufacturer Plans KOSDAQ Listing
Existing Share Sales Account for 40% of Total Public Offering
Funds to Be Raised for Expansion Investment and Joint Venture Capital Injection

High-output energy storage device manufacturer 'Ultracapacitor (UC)' producer LS Materials is set to be listed on the KOSDAQ market. Demand for ultracapacitors is rapidly increasing in fields such as wind power generation and electric vehicles, driving fast growth. The funds raised through the initial public offering (IPO) will be used to expand ultracapacitor production capacity. However, the fact that 40% of the offering volume consists of secondary share sales could act as an obstacle to receiving a high offering price during demand forecasting. While funds raised through new share issuance can be used by the prospective listed company for facility investment or debt repayment, funds from secondary share sales go into the pockets of financial investors (FIs).

According to the Financial Supervisory Service on the 6th, LS Materials will offer a total of 14,625,000 shares, comprising 8,775,000 newly issued shares and 5,850,000 secondary shares. The expected offering price range is 4,400 to 5,500 KRW per share, with a total offering size between 64.3 billion and 80.4 billion KRW. Excluding the secondary share portion, at least 37.7 billion KRW will be raised through the IPO.

Of the 37.7 billion KRW, 15 billion KRW will be used for facility funds, and another 15 billion KRW will be invested in a joint venture established with Austria's HAI company. HAI is the world's number one supplier of aluminum parts for electric vehicles. The remaining funds will be allocated for research and development. Over the next three years starting next year, automated processes will be introduced to maximize productivity. A new factory will also be established to consolidate scattered assembly and inspection plants into one location.

The joint venture HAIMK plans to conduct a paid-in capital increase next year to raise funds for building and operating production facilities necessary for the electric vehicle parts business. Based on LS Materials' high-strength lightweight aluminum technology and HAI's supply experience with Daimler, BMW, and others, the joint venture will mass-produce battery cases starting in 2025. It is expected to achieve sales of 200 billion KRW by 2027.

The UC produced by LS Materials is a high-output energy storage device used in wind turbine generators, uninterruptible power supplies (UPS) for semiconductor factories, factory automation, and automated guided vehicles (AGVs). It supports high-speed charging and has a long lifespan. It is gaining attention as an alternative to secondary batteries and lithium-ion batteries (LIBs).

LS Materials recorded sales of 70.8 billion KRW and operating profit of 8.2 billion KRW in the first half of this year. Last year, it achieved sales of 161.9 billion KRW and operating profit of 14.4 billion KRW.

KB Securities and Kiwoom Securities, the lead underwriters for the listing, selected Vinatek, Samhwa Electric, Namsun Aluminum, Aluco, and Seamechanics as comparable companies to estimate LS Materials' appropriate corporate value. They applied the EV/EBITDA method, which shows the relationship between enterprise value (EV) and earnings before interest, taxes, depreciation, and amortization (EBITDA) from operating activities. They considered the increase in depreciation expenses as LS Materials increases facility investments to boost production volume.

The average EV/EBITDA multiple of the five comparable companies was calculated at 19.84 times. LS Materials' EBITDA for the past 12 months as of the second quarter was 19.3 billion KRW, and the appropriate corporate value was estimated at 434.5 billion KRW. Applying a discount rate of 14.36% to 31.49%, the expected offering price range was proposed. The average discount rate for IPO companies listed this year was 25.84% to 37.55%.

On June 1, LS Materials conducted a third-party allotment paid-in capital increase at 3,305 KRW per share. At that time, the issuance price was calculated by Samhwa Accounting Firm using the DCF valuation method. The DCF valuation method estimates corporate value by forecasting expected cash flows and appropriate discount rates. Since LS Materials is an unlisted company, it could not use relative valuation methods based on listed companies and thus used the DCF method. LS Cable and financial investors (FIs) such as KD Investment No. 2 participated in the capital increase. Around the same time, Keyston Partners, the second-largest shareholder of LS Materials, sold some of its shares at 5,100 KRW per share.

The largest shareholder, LS Cable, holds a 50% stake in LS Materials before the offering. Keyston Partners secured a 33.48% stake through entities including KV No. 1 Investment LLC, KU Investment LLC, KUI No. 2 Investment LLC, and KD Investment No. 2 LLC. Keyston Partners will sell part of its stake through secondary share sales in the IPO offering. After the secondary share sales, the remaining stake will be 17.50%. Keyston Partners can receive between 25.7 billion and 32.2 billion KRW from the secondary share sales.

From the 20th to the 24th, demand forecasting will be conducted to finalize the offering price, followed by general subscription on the 29th and 30th. A financial investment industry official said, "After an expanded fluctuation on the first day of listing, the offering price is often finalized above the upper end of the expected price range," but added, "However, market conditions at the time of demand forecasting and the high proportion of secondary share sales could be variables." Recently, Seoul Guarantee Insurance, which withdrew its listing, had a 100% secondary share sales ratio. Oasis, which had a 30% secondary share sales ratio during its IPO push earlier this year, has decided to reattempt listing.

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