[Reporter Reading Securities Registration] Secondary Battery Mixing Equipment Specialist 'Jeil M&S' Enters KOSDAQ Listing

Jeil M&S, a specialized company in secondary battery mixing equipment, has begun the public offering process for listing on the KOSDAQ. As of the end of last year, Jeil M&S's order backlog reached 300 billion KRW, indicating a certain level of guaranteed performance growth. Most of the funds raised through the public offering will be used to repay debt, as Jeil M&S's debt ratio was quite high at 345.65% last year.

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Jeil M&S was established in 1986. In its early years, the company mainly supplied specialized equipment for the food and pharmaceutical industries. However, it has now expanded its business to secondary batteries, defense, and chemicals. The company's strength lies in its mixing technology. Based on differentiated R&D data such as blade (rotating blade) shapes and motions tailored to each material, it has developed blades capable of ultra-high viscosity mixing. This allows mixing at a level of 12 million cPs. cPs refers to the maximum viscosity unit that mixing equipment can handle during operation.

The company also possesses comprehensive engineering solution capabilities. It offers turnkey solutions from initial process design to product installation tailored to each customer's battery specifications. With these capabilities, it has successfully secured customers including Samsung SDI, LG Energy Solution, and even Northvolt.

Performance has been rapidly growing. The company recorded 82.6 billion KRW in 2021, 61.9 billion KRW in 2022, and 143.2 billion KRW in 2023. Last year, it clearly benefited from increased investments by secondary battery manufacturers, its upstream industry. Operating profit also increased from 900.5 million KRW to 1.795 billion KRW during the same period.

Performance growth is expected to continue this year. Through its securities registration statement, the company projected this year's sales and operating profit at 348.732 billion KRW and 32.623 billion KRW, respectively, representing increases of 143.57% and 1750.43% compared to the previous year. Net profit is expected to turn positive, reaching 24.75 billion KRW, more than doubling last year's figure. As of the end of last year, Jeil M&S's order backlog stood at 303.3 billion KRW, more than twice last year's performance, indicating no concerns about this year's revenue sources.

In the securities registration statement, the company explained, "In addition to the projects reflected in the estimated net profit, there are projects under negotiation targeting the second half of this year. Although continuous production and maintenance sales occur from major clients, these revenues were excluded from the net profit estimate from a conservative perspective."

Of course, there is a possibility that these targets may not be met. Recently, as demand for electric vehicles has slowed, automakers are postponing factory expansions. In fact, the Korea Automobile Mobility Industry Association (KAMA) reported last month that eco-friendly vehicle exports decreased by 13.8% to 53,369 units compared to February last year. The company also advised that "estimated sales in the business plan may vary due to internal and external reasons."

KB Securities, the lead underwriter, used the price-to-earnings ratio (PER) to determine Jeil M&S's public offering price. Comparable companies included PNT, Yoonsung F&C, Inometry, and NCIS, with an average PER of 25.85 times. Using this and the expected net profit of 19.764 billion KRW for this year, the per-share valuation was set at 24,776 KRW. Applying a discount rate of 27.35% to 39.46%, the proposed public offering price range was 15,000 to 18,000 KRW per share.

Jeil M&S plans to offer 2.4 million shares to raise between 36 billion and 43.2 billion KRW. Based on the lower end of the offering price, most of the raised funds, 29.58 billion KRW, will be used to repay borrowings. This aims to improve the debt ratio of 345.65% and enhance the financial structure by reducing interest expenses. Additionally, 6.2 billion KRW will be used as working capital for corporate management and other purposes.

However, there is concern over the relatively large volume of shares that may be circulated after listing. The company explained in the securities registration statement that 6.904952 million shares, equivalent to 33.48% of the total 20.621877 million shares, will be available for circulation one month after the listing date.

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