DaeHan Cable Expands Submarine Cable Capacity Significantly... Expecting Profitability Improvement

Plan to Raise 525.8 Billion KRW Through Rights Offering
Major Shareholder Hoban Industries to Acquire 100% of Allocated New Shares
Establish 2nd Factory to Expand Submarine Cable Production Capacity Fivefold

Daehan Electric Wire & Cable is raising investment funds to expand its submarine cable production capacity through a rights offering. The largest shareholder, Hoban Industrial, will support Daehan Electric Wire & Cable's expansion investment by subscribing to all the newly allocated shares.

According to the Financial Supervisory Service's electronic disclosure system on the 18th, Daehan Electric Wire & Cable will issue new shares through a rights offering followed by a general public offering of forfeited shares to raise 525.8 billion KRW for facility funds. New shares will be allocated at 0.50 shares per existing share, issuing a total of 62 million shares. The expected issue price per share is 8,480 KRW, with the final price to be confirmed on February 23 next year.

According to market research firm CRU, the global submarine cable market size is expected to grow from 4.9 billion USD in 2022 to 21.7 billion USD by 2029. Daehan Electric Wire & Cable judged that the demand cannot be met with only the first submarine cable plant and decided to establish a second submarine cable plant. The expected investment amount for the second submarine cable plant is 720 billion KRW, of which 475.8 billion KRW will be covered by the funds raised through the rights offering. The remaining amount will be raised through self-financing and secured loans for facilities.

Daehan Electric Wire & Cable expects that once the second submarine cable plant is completed, production capacity will increase up to five times compared to the current level. The first plant produces submarine cables such as AC66kV and AC154kV, while the second plant will mainly produce AC345kV and HVDC 525kV cables.

Submarine cables require not only large-scale fundraising ability but also high technological expertise, making the entry barrier high and the added value significant. This is why Daehan Electric Wire & Cable, which has a relatively small profit scale compared to its sales size, is investing large sums to expand its submarine cable production capacity.

Daehan Electric Wire & Cable's gross profit margin decreased from 8.1% in 2020 to 6.2% in 2021 and 5.6% in 2022. This was due to delays in some high-profit projects caused by the COVID-19 impact in 2021 and an increased sales proportion of low-value-added products such as medium- and low-voltage cables and wire materials. In the third quarter of this year, the gross profit margin rose to 6.7% as sales of high-value-added ultra-high voltage cables increased. Sales grew from 1.5968 trillion KRW in 2020 to 1.9977 trillion KRW in 2021 and 2.4505 trillion KRW in 2022. Operating profit recorded 56.6 billion KRW, 39.5 billion KRW, and 48.2 billion KRW during the same period. Operating profit margin was 3.5% in 2020, 2.0% in 2021, and 2.0% in 2022. Increasing the sales proportion of high-value-added cables is essential to boost profit scale.

Daehan Electric Wire & Cable's financial stability has improved since the change of its largest shareholder. Total borrowings decreased from 599.8 billion KRW in 2021 to 312.1 billion KRW last year. In March last year, the company raised 488.9 billion KRW through a rights offering and used 220 billion KRW to repay debt. With capital expansion from the rights offering, the debt ratio dropped from 266.4% in 2021 to 83.7% in 2022.

Hoban Industrial became the largest shareholder by acquiring shares held by Nike, the previous largest shareholder, before 2021. By participating in last year's capital increase, its stake rose to 40.1%. In this capital increase, Hoban Industrial will invest more than 210 billion KRW and subscribe to all allocated new shares.

Daehan Electric Wire & Cable expects profitability to improve. The company has been recognized for its technological expertise overseas and has consecutively secured large-scale projects in Europe, known as the birthplace of the wire industry. It has been selected as a preferred supplier for large-scale projects underway in Germany, the United Kingdom, Denmark, and other countries. The order volume increased from 65.4 billion KRW in 2022 to 140 billion KRW this year. In the United States, where wire demand is rapidly increasing, the company is also recognized for its price competitiveness and production capacity.

If forfeited shares occur after existing shareholders' subscription, investors will be recruited through a general public offering. If residual shares remain even after the general public offering, the joint lead managers including KB Securities, Mirae Asset Securities, and NH Investment & Securities will underwrite them. The underwriting fee was contracted at 0.4% of the total amount raised, indicating high confidence in the success of the capital increase. The lead managers explained, "Electricity demand is continuously increasing worldwide due to economic growth and rising income levels," adding, "Daehan Electric Wire & Cable is enhancing sales stability through efforts such as discovering new customers."

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