APR, a Key Indicator for Entry into the IPO Market... Close Attention on Demand Forecast Results

Corporate Value of 1.5 Trillion KRW Based on Upper End of IPO Price Range
Proven Growth Potential and Recent IPO Market Uptrend
LG CNS Listing Could Act as a Capital Black Hole

APR, a skin beauty device manufacturer with an estimated market capitalization of 1.5 trillion KRW, is set to be listed on the KOSPI market. The outcome of APR's listing will provide an indication of the appearance of large-scale IPOs in this year's public offering market.

According to the Financial Supervisory Service's electronic disclosure system on the 5th, APR plans to offer a total of 379,000 shares for its KOSPI listing, consisting of 309,000 newly issued shares and 70,000 existing shares. The expected price range for the offering is 147,000 to 200,000 KRW per share, with a post-listing market capitalization estimated between 1.1149 trillion and 1.5169 trillion KRW. A demand forecast for institutional investors will be conducted over five business days from the 22nd to the 26th, after which the final offering price will be determined.

Founded in 2014, APR operates beauty brands such as Mediheal, Aprilskin, Forment, GlamD Bio, and the fashion brand Nerdy. Since launching the beauty device brand 'Mediheal AGE-R' in 2021, sales have rapidly increased. As of the third quarter of last year, cumulative sales reached 371.8 billion KRW with an operating profit of 69.8 billion KRW, representing growth of 37.9% and 277.7% respectively compared to the same period the previous year.

APR explained that the growth in scale was driven by Mediheal cosmetics and the AGE-R beauty devices. As of the third quarter this year, 750,000 units of AGE-R were sold, rapidly increasing from 600,000 units sold last year. Sales of Mediheal cosmetics, which create synergy with the beauty devices, also rose by 27.8% year-on-year. Increased sales through the company’s own online mall have improved profit margins. As of November last year, approximately 5.03 million members of the company’s online mall accounted for about 60% of total sales.

Shinhan Investment Corp., the lead underwriter, and Hana Securities, the joint underwriter, selected nine comparable companies including LG Household & Health Care, Amorepacific, Clio, Bonne, iFamilySC, VT, Classys, Hi-Lonix, and Ontec to determine APR’s appropriate corporate value. Based on an average price-to-earnings ratio (PER) of 25.07 times and a trailing twelve months net income of 76.6 billion KRW as of the third quarter, the per-share value was calculated. Applying a discount rate of 18.78% to 40.3%, the expected offering price range was set at 147,000 to 200,000 KRW. This considered the average discount rates of 24.15% to 38.36% for companies listed on the KOSPI market over the past three years.

The investment banking (IB) industry expects that, considering the recent public offering market sentiment, APR will finalize an offering price acceptable to the issuer through the demand forecast. However, a conservative approach is advised regarding the increase in operating profit margin from 9.9% in 2022 to 18.8% in the third quarter of last year.

APR explained that the improvement in operating profit margin was due to overall sales growth, expansion of high-margin beauty device sales, and an increase in online mall customers. The reduced proportion of advertising expenses was also cited as a key factor in profitability improvement. In 2022, products such as AGE-R Air Shot, Yussera, and Booster Healer were launched and gained popularity.

A financial investment industry official stated, "It is true that caution against earnings inflation has increased since the Fado incident, but the atmosphere is not bad as newly listed stocks surged at the end of last year."

If APR confirms a high offering price and maintains a favorable stock price after listing, it is likely that a series of large-scale IPOs, which have not yet set their listing dates, will follow. LG CNS is considered a major player capable of leading qualitative growth in the IPO market in terms of performance and public interest. Although the IPO market showed signs of recovery last year, the absence of large-scale public offerings was a disappointment. LG CNS selected KB Securities, Bank of America (BOA), and Morgan Stanley as underwriters in 2022. However, as market liquidity decreased due to rising interest rates from the second half of 2022, LG CNS postponed its IPO. With growing expectations for the artificial intelligence (AI) industry and related stocks gaining attention, if LG CNS proceeds with its listing, it is highly likely to act as a black hole for market funds.