[IPO Spotlight] Taerim Paper's Strong Performance... Expected to Re-enter KOSPI with Success After 6 Years

Concerns Over Potential Sale of Treasury Shares and Existing Shares

[Asia Economy Reporter Park Jihwan] Taelim Paper, the leading domestic manufacturer of corrugated paperboard raw materials, is set to officially begin the KOSPI public offering process as early as this month with the submission of a securities registration statement. This marks the company's attempt to re-enter the KOSPI after 6 years since voluntarily delisting following a change in ownership due to the acquisition of shares by the private equity firm IMM Private Equity (PE) in 2015. With major domestic corrugated paperboard companies recently posting record-breaking performances, market attention is focused on how much corporate value Taelim Paper will be able to garner going forward.

According to the investment banking (IB) industry on the 10th, Taelim Paper received preliminary approval for listing from the Korea Exchange last month and plans to submit the securities registration statement as early as this month. The number of shares to be listed is 30,614,097, of which 9,184,229 shares will be raised through the public offering. The lead underwriters are Shinhan Financial Investment and Hana Financial Investment.

Founded in 1986, Taelim Paper is the top comprehensive domestic manufacturer and supplier of all types of corrugated paperboard raw materials, including surface paper, corrugating medium, and back paper. Its market share reaches 20%. IMM Private Equity acquired approximately 58.9% of Taelim Packaging and 52.2% of Taelim Paper shares for about 400 billion KRW in May 2015. One year later, in 2016, the company decided to voluntarily delist. Four years later, in 2019, Taelim Paper was sold to the domestic apparel manufacturer SeAH Sangyuk for approximately 730 billion KRW. Currently, SeAH Sangyuk is the largest shareholder of Taelim Paper, holding 52.20% of the shares. The remaining 47.80% is held by Taelim Paper itself as treasury stock. An industry insider said, "In effect, SeAH Sangyuk holds 100% of the shares, and it is expected that investment recovery will be made through the sale of existing shares during the public offering process." Although the specific structure of existing share sales involving the largest shareholder and treasury stock has not yet been finalized, the sale of existing shares itself could pose a burden on corporate valuation and the success of the public offering.

However, other market conditions are favorable. The entire corrugated paperboard industry has emerged as a representative beneficiary sector due to the prolonged COVID-19 pandemic, resulting in a steep upward trend in performance. Taelim Paper is also estimated to have achieved record-high performance last year due to a surge in demand for corrugated paperboard. In the first half of last year alone, it posted consolidated sales of 419.2 billion KRW and operating profit of 78.7 billion KRW, representing increases of 18% and 88%, respectively, compared to the same period the previous year.

Listed companies in the same industry are also recording historic performances. Asia Paper recorded sales of 945.8 billion KRW and operating profit of 93.9 billion KRW last year, marking increases of 29.3% and 42.9%, respectively, compared to the previous year. Kim Doohyun, a researcher at Hana Financial Investment, said, "Considering the supply and demand situation of corrugated paperboard, sales volume is expected to increase this year as well, and it is possible to flexibly respond to cost volatility through price pass-through. If the price of recycled corrugated paperboard stabilizes, improvement in operating profit margin through cost reduction also seems possible."

The IB industry values Taelim Paper at around 500 billion KRW upon listing. This is based on the price-to-earnings ratios (PER) of comparable companies such as Shindaeyang Paper, Daelim Paper, and Asia Paper, which are at the 5 to 6 times level. Asia Paper, which has a similar scale of performance, had a market capitalization of 440.6 billion KRW as of this morning. Taelim Paper plans to use the funds raised after listing to develop differentiated new raw materials and enter the white surface paper market.