[Post IPO] Seonam Expected 10x Sales Growth After Listing but Remained Flat

[Asia Economy Reporter Yoo Hyun-seok] Seonam posted poor performance last year. The deviation rate from the forecast predicted at the time of listing reached 90%. This was due to delays in domestic and international superconducting cable business projects caused by COVID-19. The company expects that full-scale sales will be possible from the second half of this year following the business promotion by Korea Electric Power Corporation.

According to the Financial Supervisory Service's disclosure system DART on the 24th, Seonam recorded sales of 1.4 billion KRW and an operating loss of 4.7 billion KRW last year based on individual financial statements. Sales decreased by 0.63% compared to the previous year, and the deficit widened.

Seonam was established in 2004. It produces second-generation high-temperature superconductors using its independently developed RCE-DR process. Superconductors are materials whose electrical resistance becomes '0' below a certain temperature. They do not cause power loss and have a current density more than 10,000 times higher than copper, reducing losses in power devices. Among domestic companies, it has secured various clients such as LS Cable & System and Korea Electrotechnology Research Institute, and among overseas companies, clients include Russia's SuperOx and France's Nexans.

At the time of listing, Seonam presented expected sales and operating profit for 2020 as 16.2 billion KRW and 9.6 billion KRW respectively through its securities registration statement. Sales were expected to increase by 1,056.07% compared to the previous year, and operating profit was expected to turn positive. At the time of the IPO last year, Seonam cited the commercialization project of superconducting cables as one of the factors for performance improvement. It explained that by successfully participating in Korea Electric Power's superconducting cable commercialization project, the possibility of participating in additional projects scheduled for last year increased.

Comparing this rosy forecast with the 2020 performance, the sales deviation rate reached 91.33%. Operating profit also failed to turn positive. Production performance of the main product was also poor. The operating rate of the superconducting wire product 'SAN12' was only 13% last year, down 28 percentage points from 41% in 2019. Seonam stated in its business report, "Domestic and international superconducting cable business projects predicted in the business plan were delayed from early last year due to policies of various governments caused by the COVID-19 situation, resulting in a significant decrease in sales."

Last month, Seonam announced its earnings forecast expecting sales and operating profit of 6.7 billion KRW and 150 million KRW this year. This represents a 364.29% increase in sales compared to last year and a turnaround to operating profit. However, this still shows a high deviation rate compared to the initial forecast. At the time of the IPO, Seonam expected sales and operating profit of 22.6 billion KRW and 8.3 billion KRW this year.

The possibility of performance improvement this year is attributed to the expectation that delayed projects will resume. Therefore, growth compared to last year is expected. Seonam explained in its business report, "Korea Electric Power Corporation announced the promotion of a superconducting platform business applying superconducting cables in November 2019," adding, "The superconducting cable business was approved in 2020 and is currently under design, with certification testing expected to be conducted in the first half of 2021." It further added, "Seonam delivered superconducting wire for certification testing of the demonstration project in the first half of last year, and based on the performance evaluation of the certification test cable and Korea Electric Power Corporation's business promotion, contracts and deliveries for the main volume are expected to begin from the second half of this year."