[IPO Spotlight] CNTOOS Seongjin, Was the IPO Price Too High... Expectations for Air Filter Growth

Institutional Competition Rate Recorded at 1010 to 1 During Demand Forecast
Last Year's Net Profit 28.3 Billion, Current Market Capitalization 210 Billion
Reflecting Overhang Concerns and Mask Sales Decline Worries

[Asia Economy Reporter Park Hyungsoo] Since CN2Sungjin, the manufacturer of the mask brand 'AER', was listed on the KOSDAQ market last month, its stock price has continued to perform poorly. Mirae Asset Daewoo, which was in charge of the listing underwriting, was confident that CN2Sungjin would perform well in the domestic stock market to the extent that it voluntarily set a put-back option, but the stock price is trading about 30% below the public offering price.

According to the financial investment industry on the 2nd, CN2Sungjin's stock price fell about 36% to 20,450 KRW compared to the public offering price of 32,000 KRW. Since CN2Sungjin was listed on the 28th of last month, the stock price has not exceeded the public offering price except on the listing day. On the first day of listing, trading started at 31,700 KRW, which is 300 KRW lower than the public offering price. During the day, it rose to as high as 34,650 KRW, but the closing price on the listing day was 28,700 KRW. Since then, the stock price has drawn a downward curve and has been sluggish for a month.

CN2Sungjin recorded sales of 148.1 billion KRW, operating profit of 64.2 billion KRW, and net profit of 28.3 billion KRW last year. Sales increased by 236.2% compared to the previous year, and operating profit and net profit successfully turned to a large-scale surplus.

Previously, Mirae Asset Daewoo and CN2Sungjin referred to the corporate values of four listed companies?Clean & Science, Lemon, KM, and Handok Cleantech?when determining the public offering price. When applying the average price-earnings ratio (PER) of 10.19 times of the four companies, CN2Sungjin's relative per-share valuation was calculated at 64,651 KRW. By applying a discount rate of 50.5%, the upper limit of the desired public offering price was set, and since most institutional investors participating in the demand forecast submitted prices above 32,000 KRW, the public offering price was finalized.

At that time, investors participated in the demand forecast considering that CN2Sungjin's profits increased due to the surge in mask demand caused by COVID-19. Even considering that mask demand might decrease as COVID-19 vaccination rates increase, they agreed that the possibility of a sharp decline in profits this year was low. The demand forecast competition rate was as high as 1010 to 1, reflecting high expectations from institutional investors.

Researcher Park Jongseon of Eugene Investment & Securities explained, "With masks becoming a daily necessity, the market is expected to be maintained even after COVID-19," adding, "CN2Sungjin has established production infrastructure domestically and overseas, possessing price and technological competitiveness."

Contrary to expectations, CN2Sungjin's stock price has shown a weak trend day after day since its listing. Of the 10,213,436 shares available for listing, about 58.6%, or 5,987,336 shares, were available for circulation immediately after listing. Concerns over overhang (potential sell-off volume) have hampered the stock price. The sluggish KOSDAQ market since CN2Sungjin's listing has also contributed to the weak stock price. After the stock price continued to decline following the listing, CEO Ha Chunwook, the largest shareholder, purchased 10,000 shares of the company's stock on the market on the 23rd of last month. His shareholding ratio increased from 34.8% to 34.9%.

CN2Sungjin is focusing on expanding the growth potential of its filter business division. The air filter business, which is used in air purifiers, vacuum cleaners, and automobiles, is a steadily growing sector as the importance of air increases. According to CN2Sungjin's investment prospectus, the global air filter market size is 19 billion USD. It is expected to grow at an average annual rate of 5.57% to reach about 23.7 billion USD by 2024. CN2Sungjin competes with Clean & Science in the air purifier filter market.

CN2Sungjin has secured 'source technology for spinning technology and high-performance electrostatic charging,' which enables direct manufacturing of melt-blown (MB) fabric. By directly manufacturing MB filters, it produces HEPA air filters as well as health and industrial masks. CN2Sungjin plans to use the proceeds from the public offering to invest in capacity expansion starting this year. Additionally, it will invest in developing new charging methods, antibacterial performance MB, and new filters.