Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Nearly 30 years of experience in the Korean/Asian equity research. Major sectors coverage include the following:
- Technology 
- Consumer 
- Special Situations/Deep Value Plays
- Tender Offers/M&As
- Holdcos/Stubs
- Asian Unicorns/Private Companies

Korea/Asia, Events, IPOs

Ecopro BM IPO Preview: The World's #2 Player in the NCA High Nickel-Based Cathode Materials

Equity Capital Markets

ITM Semiconductor Co Ltd / Equity Capital Markets

We would avoid the <a href="https://www.smartkarma.com/entities/itm-semiconductor-co-ltd" target="_blank" data-smartkarma-citation="entities:28313:1" rel="noopener">ITM Semiconductor Co Ltd (084850 KS)</a> IPO mainly due to valuation reasons as well as the fact that the company is selling 5.05 million shares, representing nearly 22% of its share outstanding (post-IPO) (23.15 million shares).  Thus, there are concerns that a lot of shares will be coming out in the market. Plus, the company's core products are sold for the lithium-ion batteries market to be used in electric vehicles and overall the lithium-ion battery-related stocks have performed relatively poorly in Korea this year and this will be another negative factor on this IPO. We used our estimated net profit of 24.3 billion won and applied a P/E of 25.3x to result in an implied market cap of 614.5 billion won, which results in an implied price per share of  26,544 won. This is only 2% higher than the high end of the IPO price range of 26,000 won. We used four companies including Shinheung SEC, L&amp;F, Iljin Materials, and EcoproBM as comparable companies to ITM Semiconductor. The comps are trading at a P/S multiples of 1.5x (2019E) and 1.1x (2020E). The comps are also trading at a P/E multiples of 22x (2019E) and 16.5x (2020E).We expect ITM Semiconductor to generate revenue of 286.2 billion won (up 30.3% YoY) and an operating profit of 34.6 billion won (up 54.5% YoY) in 2019. We expect its revenue to increase by 17.4% YoY to 336.1 billion won and its operating profit to increase by 11.6% YoY to 38.6 billion won in 2020. The company's operating margin averaged 9.8% in 2017 and 2018. We estimate the company's operating margin to improve to 12.1% in 2019 and 11.5% in 2020.

We would avoid the ITM Semiconductor Co Ltd (084850 KS) IPO mainly due to valuation reasons as well as the fact that the company is selling 5.05 million shares, representing nearly 22% of its share outstanding (post-IPO) (23.15 million shares).  Thus, there are concerns that a lot of shares will be coming out in the market. Plus, the company's core products are sold for the lithium-ion batteries market to be used in electric vehicles and overall the lithium-ion battery-related stocks have performed relatively poorly in Korea this year and this will be another negative factor on this IPO. We used our estimated net profit of 24.3 billion won and applied a P/E of 25.3x to result in an implied market cap of 614.5 billion won, which results in an implied price per share of  26,544 won. This is only 2% higher than the high end of the IPO price range of 26,000 won. We used four companies including Shinheung SEC, L&amp;F, Iljin Materials, and EcoproBM as comparable companies to ITM Semiconductor. The comps are trading at a P/S multiples of 1.5x (2019E) and 1.1x (2020E). The comps are also trading at a P/E multiples of 22x (2019E) and 16.5x (2020E).We expect ITM Semiconductor to generate revenue of 286.2 billion won (up 30.3% YoY) and an operating profit of 34.6 billion won (up 54.5% YoY) in 2019. We expect its revenue to increase by 17.4% YoY to 336.1 billion won and its operating profit to increase by 11.6% YoY to 38.6 billion won in 2020. The company's operating margin averaged 9.8% in 2017 and 2018. We estimate the company's operating margin to improve to 12.1% in 2019 and 11.5% in 2020.

ITM Semiconductor Co Ltd

ITM Semiconductor IPO Valuation Analysis