[Post IPO] PPI's Performance Also Blocked as Exhibition Participation Stalls

[Asia Economy Reporter Yoo Hyun-seok] PPI is experiencing negative growth just over three years after its listing on KOSDAQ. Orders have been continuously decreasing. The company plans to actively participate in offline exhibitions, which were not held due to COVID-19 but are now resuming, to reverse its sales decline.

PPI is a core component manufacturer in the optical communication field based on planar lightwave circuit (PLC) technology. It started as a campus venture in 1999. Based on proprietary PLC technology, it manufactures and supplies Splitters, arrayed waveguide gratings (AWG) for data centers and communications, and measuring instruments. The products are produced at the first factory, established in 2000, which handles thin film manufacturing and chip processing, and the second factory, established in 2011, which handles optical device measurement and module production. The company entered the KOSDAQ market in 2019.

At the time of listing, the desired public offering price was between 6,000 and 7,000 KRW, with the final offering price set at the upper limit of 7,000 KRW. This reflected expectations of growth due to the rapid increase in global base station investments driven by 5G infrastructure expansion and increased data traffic. The company successfully raised a total of 7 billion KRW through demand forecasting.

Of the funds raised, excluding listing fees, PPI planned to use a total of 6.7 billion KRW for facility investment and debt repayment by last year. Specifically, 2.6 billion KRW was allocated for purchasing process and measuring equipment for 5G network AWG, and 4.1 billion KRW was planned for short-term debt repayment.

However, the actual fund execution differed from the plan. By the end of last year, PPI had not invested in facility funds and had only invested 1.3 billion KRW in debt repayment. However, in the first half of this year, it invested 2.5 billion KRW in facility funds and 2 billion KRW in debt repayment. A company official stated, "The delay in debt repayment was due to a significant decrease in sales."

Performance also declined contrary to expectations. Sales, which were 38.1 billion KRW in 2018, increased to 48.6 billion KRW in 2019. Operating profit slightly decreased from 2.8 billion KRW to 2.7 billion KRW during the same period.

However, performance sharply declined starting last year. Last year, sales were 21.9 billion KRW with an operating loss of 6.5 billion KRW. Sales decreased by 55.06% compared to the previous year, and operating profit turned into a loss. In the first half of this year, sales were 6.5 billion KRW with an operating loss of 6.6 billion KRW. Sales decreased by 36.70% compared to the same period last year, and the operating loss widened.

The biggest reason for the performance decline is the reduction in orders. PPI mainly secures product contracts through exhibitions. Due to the COVID-19 pandemic, exhibitions were not held, causing order channels to halt for a while. Last year's total orders were 22.5 billion KRW, a sharp decrease from 50.9 billion KRW in 2019. Total orders in the first half of this year were 9.8 billion KRW, down 2.1 billion KRW from 11.9 billion KRW in the same period last year.

However, PPI emphasized the possibility of performance improvement. The company plans to secure sales by participating again in exhibitions that were missed due to COVID-19. A company official said, "Due to the nature of the company, we should participate in overseas exhibitions, but since those were blocked, sales sharply declined. We plan to participate in large-scale exhibitions next year to improve performance."

Additionally, the company is hopeful about sales in China. The official emphasized, "We are continuously conducting sample tests in China, and the related sales proportion could increase in the future."