[IPO Preview] Stormtech, From Water Purifiers to Comprehensive Home Appliance Components Company

Development of over 800 water purifier parts... Supplied to 450 domestic and international companies
Offering price range 8,000~9,500 KRW... "Facility expansion and export increase"

Stormtech, a specialized manufacturer of water purifier parts, is knocking on the door of the KOSDAQ market. Stormtech plans to expand its production factory using the proceeds from the public offering to pursue external growth.

Founded in 1999, Stormtech has developed a total of over 800 types of key water purifier parts such as fittings, valves, and safety faucets over 25 years. The company has established automated and semi-automated production facilities to secure the most efficient production system and maintains excellent quality, supplying parts to more than 350 major domestic water purifier companies and 100 overseas companies.

To maintain and manage quality and eco-friendly manufacturing systems, Stormtech has obtained the international standard quality management system certification ‘ISO 9001’ and environmental management system certification ‘ISO 14001’. Additionally, to secure safety in drinking water treatment and competitiveness for overseas market entry, the company acquired certification from the U.S. National Sanitation Foundation (NSF) and undergoes annual audits to maintain product quality excellence.

The majority of Stormtech’s sales come from fittings and valves for water purifiers. Its main customers include leading domestic water purifier companies such as Coway, Cuckoo Homesys, SK Magic, and ChungNaiS. Sales to these four companies account for over 30% of total sales. By country, domestic sales make up 85%, while exports account for about 15%.

Stormtech’s performance has shown an increasing trend over the past three years. Sales grew from 40 billion KRW in 2020 to 48 billion KRW in 2021, and 51 billion KRW last year. Operating profit also increased from 8.2 billion KRW in 2020 to 10.5 billion KRW in 2021, and 11.8 billion KRW last year. In the first half of this year, the company recorded sales of 29.4 billion KRW and operating profit of 7 billion KRW, marking increases of 11.5% and 1.7% respectively compared to the same period last year.

This public offering will be conducted through a 100% new share issuance. The total number of shares offered is 3.35 million, with a price band of 8,000 to 9,500 KRW per share. The total offering amount is approximately 31.8 billion KRW based on the upper limit of the price band. The offering price was calculated by applying the average price-to-earnings ratio (PER) of four comparable companies.

The four comparable companies selected by Stormtech are Handok Cleantech, Picogram, Cuckoo Homesys, and Coway. These companies were chosen by narrowing down listed companies with more than 30% of sales related to water purifiers and solid performance. Their PER ranges from 4.28 to 46.12 times. Handok Cleantech, Cuckoo Homesys, and Coway have PERs around 10 times, while Picogram’s PER is notably high at 46 times. A high PER generally indicates overvaluation.

Thanks to Picogram, the average PER of the four companies was calculated at 18.28. This was applied to Stormtech’s half-year net profit, and the offering price was calculated by discounting 26.6% to 38.2% from the valuation. The expected market capitalization is estimated to be between 107.6 billion and 127.7 billion KRW.

Stormtech plans to use the proceeds primarily to purchase a new factory. Currently, Stormtech produces products at its headquarters located in Gangseo-gu, Seoul, but with annual sales increasing, additional production capacity expansion is necessary. Accordingly, about 17.7 billion KRW of the public offering proceeds will be used to purchase a factory in either Namdong Industrial Complex in Incheon or Sihwa Industrial Complex in Ansan.

The remainder will be used for research and development (R&D). Stormtech plans to expand into various fields beyond water purifiers, including dishwashers, washing machines, refrigerators, and air purifiers. To this end, the company will hire necessary research personnel and purchase inspection equipment.

Additionally, overseas marketing will be pursued. Stormtech is focusing on securing global customers by participating in overseas water-related industry exhibitions. The company plans to continuously increase its export ratio, currently at 15%, and eventually establish overseas factories to expand local sales capabilities.

Kang Ki-hwan, CEO of Stormtech, said, “The domestic and international water purifier market is growing, and we plan to expand our business area by developing comprehensive home appliance parts in the future. We will accelerate the company’s growth by using the KOSDAQ listing as a stepping stone.”

Meanwhile, Stormtech plans to conduct a demand forecast for institutional investors over five business days from October 31 to November 6 to finalize the public offering price, followed by a general subscription on November 9 and 10, and then list on the market. The lead underwriter is Hi Investment & Securities.