Deokseong's Performance Improves Due to Strong Sales of Eco-Friendly Materials

The election to choose the next president is just one year away. Speculative funds betting on leading presidential candidates are rapidly increasing in the domestic stock market. Theme stocks related to top-ranking figures in the '2022 presidential candidate approval ratings,' such as Lee Nak-yeon, a member of the Democratic Party of Korea, Lee Jae-myung, Governor of Gyeonggi Province, and former Prosecutor General Yoon Seok-youl, are surging. As former Prosecutor General Yoon's approval ratings rise sharply, the stock price volatility of listed companies managed by his university alumni in executive positions has also increased. Asia Economy aims to examine the business performance and financial stability of political theme stocks.

[Asia Economy Reporter Park Hyung-su] Deokseong has been listed as a theme stock related to former Prosecutor General Yoon Seok-youl since early last year. When it became known that the CEO and outside director were university alumni of former Prosecutor General Yoon, the stock price fluctuated wildly. As stock price volatility increased, Deokseong responded to an inquiry disclosure stating that there is no business relation with former Prosecutor General Yoon.

Founded in 1966, Deokseong was the first in Korea to start producing synthetic leather. Currently, it operates production plants in Suwon, Incheon, Osan, Pyeongtaek, and Guangzhou, China.

Synthetic leather is used not only in shoes, bags, and clothing but also in sports goods, accessories, IT products, furniture, and various other items. As public opinion for animal protection grows stronger, synthetic leather is replacing natural leather.

Deokseong supplied the fabric for the official balls Fevernova for the 2002 Korea-Japan World Cup, Teamgeist for 2006, and Brazuca for the 2014 Brazil World Cup. It also exclusively supplied fabric for the official balls of Euro 2004 and 2008 to the global sports equipment company Adidas. The company supplies IT device-related accessories to numerous global companies and recently began supplying cosmetic material puffs.

Deokseong produces synthetic resin, one of the raw materials with a high cost ratio in synthetic leather production, in-house. This enhances quality stability and cost reduction effects. It introduced a recycling plant to recover dimethylformamide (DMF) aqueous solution generated during the production of wet synthetic leather. This reduces costs while also protecting the environment.

In 2017, Deokseong processed polyurethane acrylate (PUA) to launch artificial leather products that emit almost no pollutants such as volatile organic compounds (VOCs). Although it was not the first to develop this technology ahead of overseas competitors in the US and Japan, Deokseong demonstrated advanced technology in terms of price competitiveness. The company introduced a simpler process than the existing coating method, greatly improving production efficiency. Eco-friendly artificial leather is gaining attention as interior material, including for car seats.

With increased sales of eco-friendly materials, Deokseong achieved strong performance last year. On a consolidated basis, sales reached 117.7 billion KRW, up 35.7% from the previous year. Operating profit and net profit increased by 1083% and 1810%, respectively, compared to the previous year. Sales surpassed 100 billion KRW again for the first time in three years since 2017.

Deokseong's stock price has risen about 300% compared to the end of 2019. This was influenced not only by improved performance but also by being grouped as a stock related to former Prosecutor General Yoon. Earlier, on February 6 last year, Deokseong responded to an inquiry disclosure stating, "It is true that the CEO and outside director are university alumni of former Prosecutor General Yoon Seok-youl," but also clarified, "There is absolutely no past or present business relation." Although denying any connection, the stock price continued to fluctuate according to former Prosecutor General Yoon's approval ratings.