[Reporter Reading Securities Report] Supercapacitor 'Kochip' Countdown to KOSDAQ Listing

Temporary Performance Slump... Improvement Expected with New Businesses and Market Recovery
Hopeful IPO Price 11,000~14,000 Won... "All In on Facility Investment"

Supercapacitor specialist company Cochip has entered the final stage of listing on the KOSDAQ. Through this listing, Cochip plans to raise up to 21 billion KRW. The secured funds will be invested in expanding production facilities for both existing and new businesses.

Supercapacitor Specialist Company with Faster Charging and Higher Output Compared to Lithium-Ion Secondary Batteries

Cochip was established in 1994. In 2002, it officially entered the supercapacitor business by acquiring Samsung Electro-Mechanics' carbon-based secondary battery business. A supercapacitor is an energy storage device that stores energy and supplies current instantaneously when needed. It can be considered a type of secondary battery. Compared to lithium-ion secondary batteries, supercapacitors have a smaller charge capacity but feature relatively faster charging times and higher output.

Performance has been sluggish. Sales, which were 36.6 billion KRW in 2020, increased to 47.3 billion KRW in 2021 but decreased to 38.8 billion KRW in 2022. The same trend continued last year. As of the cumulative third quarter of last year, sales and operating profit were 25.9 billion KRW and 3.7 billion KRW, respectively, down 2.83% and 36.83% compared to the same period the previous year.

A company representative explained, "The main reason for the decline in sales is the decrease in MLCC sales due to the IT market downturn," adding, "Regarding profits, the increase in various costs such as listing preparation and stock compensation, as well as a decline in product-related profit margins, were factors."

However, expectations are different for this year. The commercialization of on-device artificial intelligence (AI) products is expected to act as a positive factor. The representative said, "We expect the demand for MLCC to recover as the commercialization of on-device AI products and the overall recovery of IT device demand take place."

The supercapacitor sector continues to grow. While MLCC accounted for a large portion in the early stages of the business, now more than 60% of total sales come from supercapacitors (brand name ChipCell Carbon). Considering that the share was only 30% in 2020, this indicates rapid growth.

Cochip’s main products, small and ultra-small supercapacitors, are used in various applications such as IP cameras, GPS modules, washing machines, AI speakers, dryers, drones, and bicycles. The company expects the growth of supercapacitors to continue as they are also utilized in expanding markets like solar power and smart homes.

Driving New Business in Lithium-Based Small Secondary Batteries

The lithium-based small secondary battery product, 'ChipCell Lithium,' is also a promising area. This product offers rapid charging within 10 minutes and has a long lifespan. It has also been verified to have high safety, with no risk of explosion or fire under physical shocks such as nail penetration or in overcharge and overdischarge situations.

In its securities registration statement, the company stated, "The small lithium-ion battery market is expected to grow steadily due to increased substitute demand and expansion of the downstream market," adding, "Under the ESG (Environmental, Social, and Governance) management environment, alkaline batteries are subject to usage restrictions, and Cochip’s products are eco-friendly alternatives to alkaline batteries."

Cochip’s desired public offering price range is 11,000 to 14,000 KRW. When determining the offering price, Cochip used the EV/EBITDA multiple. This method is commonly used in manufacturing industries with significant non-cash expenses such as depreciation on tangible assets and machinery.

Korea Investment & Securities, the lead underwriter, selected two companies with similar businesses, Vinatek and Samhwa Electric, as final comparable companies. Applying their EV/EBITDA multiple of 20.80x, a relative value per share of 17,219 KRW was calculated. A discount rate of 18.69% to 36.12% was then applied to derive the desired offering price.

The company plans to offer a total of 1.5 million shares, raising between 16.5 billion and 21 billion KRW. All the secured funds will be used for facility investments. First, 4.6 billion KRW will be used for building expansion. Additionally, 5.9 billion KRW each will be invested in ChipCell Carbon and ChipCell Lithium facilities, totaling 11.8 billion KRW.

Cochip will conduct a demand forecast for institutional investors from the 6th to the 12th of next month to finalize the offering price. General subscription will be held from the 18th to 19th of the same month, and the company plans to list on the KOSDAQ market in March.