[IPO Spotlight] Beomhan Fuel Cell Expands Investment in Power Generation and Marine Fuel Cell Businesses After Listing

[Asia Economy Reporter Jang Hyowon] Hydrogen fuel cell developer Beomhan Fuel Cell plans to expand production facilities for power generation and ship fuel cell businesses after listing on KOSDAQ.

Beomhan Fuel Cell is a hydrogen fuel cell technology development and product manufacturing company established by a physical division of Beomhan Industry's hydrogen fuel cell business unit at the end of 2019. As of the first quarter of this year, sales amounted to 8.5 billion KRW, with 6.8 billion KRW from the fuel cell division and 1.7 billion KRW from the hydrogen charging station division. The sales proportions of each business unit are 80.4% and 19.6%, respectively.

The hydrogen fuel cell division is expanding into submarine and building fuel cells, as well as hydrogen charging station construction projects, based on proprietary technology developed independently or acquired through technology transfer.

The submarine module succeeded in commercializing fuel cell submarines as the world's second after Germany. Since 2018, it has been supplying the 3,000-ton class next-generation submarine for the Republic of Korea Navy's Jangbogo-III project. Building fuel cells are marketed through the construction company network of dealerships, and hydrogen charging stations operate by investing in the 'Hydrogen Energy Network.' According to the securities registration statement, more than 22 hydrogen charging stations have been ordered.

Beomhan Fuel Cell's desired public offering price ranges from 32,200 KRW to 40,000 KRW. It plans to raise approximately 68.8 billion KRW based on the lower end of the offering price by issuing 2,136,000 new shares.

The desired offering price was calculated by applying the enterprise value/EBITDA (EV/EBITDA) multiples of comparable companies. The reason for choosing EV/EBITDA instead of the commonly used price-earnings ratio (PER) is due to the heavy depreciation burden from large-scale facility investments. Using EBITDA, which excludes depreciation expenses, is interpreted as an effort to properly recognize the company's value.

The comparable companies include S-Fuel Cell, Sang-A Frontec, Vinatek, and JNK Heater. S-Fuel Cell was selected because 96.6% of its sales come from building fuel cells. Sang-A Frontec is a developer of e-PTFE membrane materials. Vinatek's fuel cell parts (MEA, support, catalyst) division and JNK Heater's hydrogen extractor and hydrogen charging station divisions account for 7.9% and 15.1% of sales, respectively.

The EV/EBITDA multiples of these companies are S-Fuel Cell (42.6x), Sang-A Frontec (29.4x), Vinatek (27.7x), and JNK Heater (42.8x), with an average multiple of 35.6x. Multiplying this by EBITDA of 11.6 billion KRW and applying a discount rate of 27.8% to 41.8% yielded the desired public offering price.

Beomhan Fuel Cell plans to use the public offering funds for facility capital, operating capital, and other expenses. Specifically, about 26 billion KRW will be invested in facility capital through 2024 and beyond. Starting in 2023, the company plans to enter the power generation fuel cell and ship fuel cell businesses and will establish a second factory of approximately 3,000 pyeong (about 9,917 square meters) to support this.

Additionally, the company will invest 24 billion KRW in research and development to strengthen its position in the ship fuel cell and truck and bus fuel cell markets by leveraging its core competencies in high-density, high-output hydrogen fuel cell technology. In particular, 15.6 billion KRW will be allocated for R&D of 100kW-class hydrogen vehicle fuel cells, and 7 billion KRW for 25kW-class building fuel cell R&D.

Meanwhile, Beomhan Fuel Cell will conduct demand forecasting on June 2?3 and hold a general subscription on June 8?9. The lead underwriter is NH Investment & Securities, with Korea Investment & Securities as the joint underwriter.