[IPO Spotlight] Top Material Accelerates Growth with Investment in Next-Generation Cathode Material Mass Production

Offering Price to Be Finalized After Demand Forecast on 27-28
Offering Price Range 27,000-30,000 KRW...Expecting Minimum Fundraising of 54 Billion KRW
Investment in Anode Material Production Facilities with Raised Funds...Monthly Production Capacity of 100 Tons

[Asia Economy Reporter Hyungsoo Park] As secondary battery-related stocks attract attention in the domestic stock market, electrode material company Top Material is set to be listed on the KOSDAQ market. The funds raised through the initial public offering (IPO) will be invested in expanding cathode material production capacity and research and development for the growth of the cathode material business.

According to the Financial Supervisory Service's electronic disclosure system on the 15th, Top Material will issue 2 million new shares to raise at least 54 billion KRW. The expected public offering price range is 27,000 to 30,000 KRW. The estimated market capitalization is approximately 215.7 billion to 239.6 billion KRW. A demand forecast will be conducted over two days starting from the 27th for institutional investors, and the public offering price will be finalized. Subscription for general investors will take place from the 4th to the 5th of next month. Korea Investment & Securities is the lead underwriter.

Top Material produces electrode materials alongside its system engineering business in the secondary battery sector. System engineering is a technology-intensive business that supplies pilot or full production equipment to secondary battery manufacturers. Top Material provides comprehensive supply including all process equipment, installation, and commissioning.

Top Material also manufactures electrodes and cathode materials, which are core materials for secondary batteries. It began mass production of high-performance electrodes, which account for 76% of secondary battery raw materials, from the second half of this year. The company is developing next-generation cathode materials, high-manganese cobalt-free cathode materials (LMNO, LMRO). These next-generation cathode materials, LMNO and LMRO, adopt a nano-milling single-crystal process that does not rely on precursors, making them environmentally friendly and cost-effective to manufacture. They are gaining attention as next-generation cathode materials that complement the drawbacks of existing nickel-cobalt-manganese (NCM) cathode materials and lithium iron phosphate (LFP) cathode materials.

CEO Hwanjin Noh, a first-generation developer at Samsung SDI, developed Korea’s first lithium-ion battery for mobile phones. Later, he served as a professor at Hanyang University and founded Enerland as a university startup. Enerland developed high-power lithium-ion batteries for electric model airplanes and exported them to the US and Europe. CEO Noh served as Vice President of Technology at the US secondary battery manufacturer A123 Systems for five years, where he developed and commercialized the world’s first lithium iron phosphate (LFP) batteries for electric vehicles and energy storage systems (ESS). He also oversaw the construction of the first gigafactory in the US for LFP battery production. Returning to Korea, he founded Top Material in 2012. In March last year, through a paid-in capital increase, Cowintech acquired new shares, changing the largest shareholder from CEO Noh to Cowintech.

Last year, the company recorded sales of 31.9 billion KRW and operating profit of 4.8 billion KRW, and achieved sales of 37.8 billion KRW and operating profit of 8.3 billion KRW in the first half of this year. As of the first half, the system engineering business accounted for 93.54% of sales, and electrode sales accounted for 1.51%.

Korea Investment & Securities, the lead underwriter, selected Nsys, TSI, Daebo Magnetic, and Cowintech as comparable companies to determine Top Material’s public offering price. Based on an average price-earnings ratio (PER) of 29.3 times, the per-share valuation was calculated at 37,885 KRW. Applying a discount rate of 20.81% to 28.73%, the expected public offering price range was proposed.

Based on the lower end of the expected public offering price range, raising 54 billion KRW, the company plans to allocate 43 billion KRW for facility funds and 9 billion KRW for operating funds. As the secondary battery market grows, demand for cathode materials is rapidly increasing. Top Material is conducting research and development to mass-produce cobalt-free cathode materials. It was selected for a demand-linked project by the Ministry of SMEs and Startups and is developing LMRO cathode materials. Small-scale production will begin next year, with production volume increasing from 2024.

Using the public offering funds, Top Material will establish cathode material production facilities capable of producing 100 tons per month at its second factory in Asan, Chungnam. Next year, investment in the second phase of cathode material production facilities will begin. Facility construction including clean rooms is expected to cost 10.9 billion KRW, and process equipment will require 32.2 billion KRW.

Top Material’s debt ratio decreased from 68.66% in 2020 to 21.90% last year. As of the end of last year, the dependence on borrowings and interest coverage ratio were 9.56% and 84.39 times, respectively, indicating a healthy financial status.