[Post-IPO]⑫ Amogreentech, Performance Slows Due to COVID-19... "Expecting New Business Sales in Second Half"

[Asia Economy Reporter Hyunseok Yoo] Amogreentech, a nano-material-based materials and components company, has encountered a major obstacle in the form of the novel coronavirus infection (COVID-19). As the front-end market stalled due to COVID-19, its performance also deteriorated. However, the company emphasizes that the possibility of performance improvement remains open due to sales generation in new business sectors in the second half of the year.

Amogreentech was established in 2004. It operates in advanced materials such as nano membranes, functional materials like thin films, and environmental energy-related businesses such as energy storage systems (ESS). It possesses various advanced materials applied in high-growth areas including 5G, electric vehicles, IoT, and next-generation devices. Listed in 2018, Amogreentech entered the KOSDAQ market through a technology growth special case. At the time of listing, it received an A grade from both Korea Enterprise Data and NICE Credit Information based on its "high-performance metal core manufacturing technology using metal raw materials."

In the public offering market, Amogreentech's expected offering price range was 8,800 to 9,900 KRW. The lead underwriter, Samsung Securities, projected that Amogreentech would record sales of 85 billion KRW and an operating loss of 3.1 billion KRW in 2018, then achieve sales of 131.5 billion KRW and operating profit of 7.5 billion KRW in 2019. For 2020, sales were expected to reach 175.8 billion KRW with operating profit of 18.9 billion KRW, and in 2021, sales of 213.6 billion KRW and operating profit of 22.9 billion KRW were forecasted.

Among these, sales in the advanced materials sector were expected to increase from 46.7 billion KRW in 2018 to 103.7 billion KRW, functional components from 36.9 billion KRW to 49.5 billion KRW, and environmental energy from 1.5 billion KRW to 22.6 billion KRW. The main basis for this forecast was the anticipated growth due to an increase in projects conducted jointly with multiple companies.

Amogreentech's public offering price was set at the upper end of the expected range, 9,900 KRW. In the institutional demand forecast, the competition rate was 164.22 to 1, and in the general public subscription, it was 22.13 to 1. After listing in March last year, Amogreentech's stock price rose to as high as 17,450 KRW intraday on February 10. Although it dropped to 6,500 KRW last March due to COVID-19, it still exceeds the offering price, recording a stock price in the 13,000 KRW range this month.

However, unlike the stock price, the performance has been sluggish. While 2018 results were close to forecasts, there was a significant gap in 2019. In 2019, Amogreentech recorded sales of 93.4 billion KRW and operating profit of 2.6 billion KRW. The deviation rates from the forecast were 28.99% and 65.03%, respectively. The company explained in its business report that sales of ESS were delayed due to postponed investments in markets such as 5G.

This year’s business is expected to be affected by COVID-19. If the front-end industry deteriorates due to COVID-19, negative growth in performance may occur. Amogreentech recorded sales of 14.1 billion KRW in the second quarter, a 17.03% decrease compared to the same period last year, and an operating loss of 2.1 billion KRW, with the loss margin increasing compared to the same period. For the first half of the year, sales were 48.6 billion KRW with an operating loss of 1 billion KRW. Sales increased by 9.53% compared to the same period last year, but operating profit turned to a deficit. A company official said, "We had a positive outlook on various aspects at the beginning of the year, but the front-end market was hit due to COVID-19." He added, "The second quarter is traditionally an off-season, so this also had an impact."

Regarding high-efficiency magnetic materials used in electric vehicles, 5G, and ESS, sales in the first half of this year were 11.662 billion KRW. This is 43.13% of last year's sales (27.039 billion KRW), less than half of last year’s level. Considering that global automobile manufacturers’ factories were halted due to COVID-19 in the first half of this year, it is interpreted that this sector was affected. Amogreentech’s major electric vehicle customers include Tesla and BYD. In other words, if COVID-19 worsens, it could negatively impact Amogreentech’s sales.

The company expects growth in new business areas. The area with the greatest expectation is vents. Vents are acoustic waterproof components that allow sound transmission while providing waterproof functionality in mobile devices. Major customers include Samsung Electronics and Huawei. Based on IDC data from 2017, Amogreentech estimated the vent market size to have exceeded 100 billion KRW in 2018 and to surpass 450 billion KRW by 2025.

Amogreentech’s vent business segment is also expected to exceed last year’s sales. As of the first half of this year, sales of nano membrane materials, which include vents, were 6.964 billion KRW. This accounts for 75.50% of last year’s sales (9.223 billion KRW) in the first half alone. Especially since major customers are launching strategic smartphones in the second half, sales are expected to increase further. The company explained that the first and third quarters are peak seasons.

Regarding ESS, sales were sluggish due to delayed investments in markets such as 5G, but this year shows a different trend. In the first half of this year, the ESS segment recorded sales of 3.4 billion KRW, surpassing last year’s performance (2.5 billion KRW). Domestic mobile carriers are the main customers for ESS products. The company expects ESS-related sales to improve in the second half of this year as well. A company official said, "Vents have been generating sales in earnest since last year, and the current trend is good. ESS is expected to perform better this year than last year."