[IPO Spotlight] OSP, Large-Scale Expansion Amid Growth in Pet Food Market

Expansion investment with IPO raised funds... Annual production capacity increased by 14,000 tons
Factory operating rate 93.7% in the first half... Operating profit margin 16.8%

[Asia Economy Reporter Park Hyungsoo] Organic pet food manufacturer OSP is set to be listed on the KOSDAQ market next month. As the pet-related market rapidly grows, OSP's sales are also increasing. OSP plans to expand its production capacity using funds raised through its initial public offering (IPO).

According to the Financial Supervisory Service's electronic disclosure system on the 13th, OSP will issue 2,056,000 new shares to raise at least 12.9 billion KRW. From the 27th to the 28th, demand forecasting will be conducted targeting institutional investors, and the public offering price will be finalized. The expected price range is set between 6,300 and 8,400 KRW. Daishin Securities is the lead underwriter. Based on the public offering price, the estimated market capitalization is between 58.9 billion and 78.5 billion KRW.

Founded in 2014, OSP is an organic pet food manufacturer. In 2019, it became a subsidiary of animal pharmaceutical manufacturer Woojin B&G. The manufacturing expertise and patented technologies accumulated by Woojin B&G over 45 years have supported OSP's growth. OSP is also expanding its overseas business by actively utilizing Woojin B&G's international network. Woojin B&G holds a 57.57% stake in OSP.

OSP has expanded its scope from original equipment manufacturing (OEM) to original design manufacturing (ODM). Its clients include ANF (Wooriwa), Pulmuone, Sajo Dongawon, and Seonjin Pet. OSP is also broadening its business portfolio by launching its own brand, 'Natural Signature.'

The pet food market continues to grow steadily. This is due to an increase in households with pets and a trend toward premiumization of pet food. Globally, the number of 'Petfam' (Pet+Family) households, which consider pets as family members, is rising. Additionally, 'Pet-chef' households have emerged, offering premium handmade pet food and snacks made with ingredients safe and of quality comparable to human food.

The domestic market is projected to grow at an average annual rate of 5.8% from 2021 to 2026, reaching a scale of 1.9 trillion KRW. The pet cat food market is expected to grow at an average annual rate of 10.7%, the pet dog market at 1.5%, and the snack market at 6.4%.

Amid steady market growth, OSP is pursuing a plan to invest a total of 24.5 billion KRW to expand its factory. The new facility is scheduled for completion by the end of 2024 and is expected to operate normally from 2025. The new factory's annual production capacity is estimated at 14,044 tons. The existing factory's operating rate was 93.7% as of the first half of this year. Cumulative sales for the first half reached 10.5 billion KRW, with an operating profit of 1.8 billion KRW, marking increases of 70.5% and 128.5%, respectively, compared to the same period last year.

In addition to expanding production capacity, OSP is also pursuing business diversification. New services will include a healthcare platform providing pet medical diagnostics and pharmaceuticals, as well as services linking pet lodging, funerals, and insurance.

Daishin Securities, the lead underwriter, selected Daedoo Industry and Igelvet as comparable companies to determine OSP's appropriate corporate value. Based on an average price-earnings ratio (PER) of 23.92 times, the per-share valuation was calculated at 9,996 KRW. Applying a discount rate of 36.97% to 15.97%, the suggested public offering price range was set at 6,300 to 8,400 KRW. As of the first half of this year, OSP's operating profit margin was 16.83%, surpassing Daedoo Industry's 4.48% and Igelvet's 13.65%.