[Asia Economy Reporter Jo Gang-wook] Daelim Industrial, with over 80 years of tradition, is transitioning to a holding company system through corporate division and will be re-listed on the 25th as the holding company DL and the business company DL E&C. In particular, there is high market interest in 'DL E&C,' which is re-entering the stock market through Daelim Industrial's core construction division.
According to Daishin Securities and related industries on the 25th, DL E&C is the first comprehensive construction company with the longest history in Korea. Starting as a building materials company in 1939, it led major domestic SOC construction projects such as the Gyeongbu Expressway and Gyeongin Expressway during the economic development process in the 1960s, rising to become the top construction company in domestic project contract amounts. In 1966, it secured the status of the first overseas construction company by winning a contract for a port construction project in Vietnam.
Since then, it has demonstrated competitiveness in overseas plant construction projects, including exporting plants for the first time through boiler installation work at a Saudi oil refinery, and has participated in the construction of major domestic landmarks such as the National Assembly Building, Sejong Center for the Performing Arts, and Jamsil Sports Complex.
Currently, it is the third-largest comprehensive construction company in Korea by contract amount, owning apartment brands such as ‘Acro’ and ‘e-Pyeonhansesang.’ In particular, ‘Acro’ is one of the most preferred brands even among high-end brands.
Originally, the owner family directly held shares in Daelim Industrial, but during the 1999 restructuring of the governance structure, Daelim Corporation, which is effectively 100% owned by the owner family, took control of Daelim Industrial. As a construction subsidiary of DL E&C, DL Construction independently conducts order activities and has established its business area mainly in metropolitan cities and small to medium-sized complexes. Through this governance restructuring, the subsidiaries recognized by DL E&C will be limited to the construction affiliate DL Construction, while other subsidiaries will be held by the holding company DL.
The personnel division ratio of Daelim Industrial is 44.4% for DL and 55.6% for DL E&C, with the holding company DL remaining as the surviving entity and the business company DL E&C being newly listed. Accordingly, DL and DL E&C, which were split from Daelim Industrial, are scheduled to be listed on the KOSPI market on the 25th.
According to the 2019 business report, Daelim Industrial's construction division sales amounted to 7.9915 trillion KRW (81%), and petrochemical division sales were 1.0635 trillion KRW (16%), showing a large sales gap of about 5.1 times between the two divisions. Operating profit was 1.1321 trillion KRW (operating margin 14.2%) for the construction division and 77.4 billion KRW (operating margin 4.9%) for the petrochemical division, with the construction division contributing overwhelmingly to profits. The construction division's profits, which served as a cash cow, were used as investment funds for the petrochemical division, resulting in suppressed growth in the construction division and lowered dividend expectations among investors.
Lee Dong-heon, a researcher at Daishin Securities, said, "Due to the different cycles of the petrochemical and construction businesses and the absence of other group affiliates besides Daelim Industrial, DL E&C has pursued a conservative business strategy. In particular, conservative management along with conglomerate discounts has been recognized as a major reason for its undervaluation compared to other companies," adding, "After the split, active investment and order expansion will quickly resolve the undervaluation."
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