[Reporter Reading Securities Report] Haizen R&M Goes All In on Investment in 'Robot Actuators'

Robot and Machinery Drive Device Specialist Manufacturer
Most Procurement Funds Used for Facilities and Workforce

Actuator specialist manufacturer Hyzen R&M has submitted a securities registration statement and begun the process of listing on KOSDAQ. Actuators are components responsible for the movements of legs, arms, and other parts necessary for robot operation. The company plans to use most of the funds raised from this public offering for facility investment and research and development (R&D).

Hyzen R&M originated from LG Electronics' Motor Division in 1963. In 2008, CEO Kim Jae-hak acquired the division and launched it as an independent corporation named Hyzen Motor. As of October 2023, the company changed its name to the current one. In its early business days, the company utilized motor technology accumulated through designing and manufacturing industrial motors for petrochemical and machine tool industries to independently develop all actuator components such as servomotors and reducers used in industrial robots and collaborative robots. Additionally, it developed algorithms and software technology to precisely control actuator operation, securing both hardware and software capabilities.

Looking at the company’s major shareholders, corporations outnumber individuals, most of which have close ties to CEO Kim Jae-hak. The largest shareholder is Danocorp (29.21%), where CEO Kim is the largest shareholder. The second-largest shareholder is Ilsin Spinning, a KOSPI-listed company (27.39%), whose largest shareholder is Kim Young-ho, the brother of CEO Kim’s spouse Kim Hye-sook. The third-largest shareholder is Dano International (12.89%), where CEO Kim’s child Kim Woo-jin is the largest shareholder. CEO Kim personally holds 7.63% of Hyzen R&M’s shares.

The company’s performance has recently slowed. Sales increased from 85.2 billion KRW in 2021 to 87.5 billion KRW in 2022 but decreased to 77.2 billion KRW last year. Operating profit followed a similar trend: 2.2 billion KRW in 2021, 4.9 billion KRW in 2022, and 4.3 billion KRW in 2023. The company explained the decline in performance by stating, "Demand in the front-end market for servomotors and drives temporarily decreased," and added, "We expect demand in the front-end markets of collaborative robots and autonomous mobile robots (AMR) to increase, which should lead to sales growth."

The lead underwriter, Korea Investment & Securities, used the EV/EBITDA multiple to determine Hyzen R&M’s offering price. The EV/EBITDA multiple is mainly used to price public offerings in manufacturing industries with significant non-cash expenses such as depreciation on tangible assets and machinery. Comparable companies selected were SPG and Raontech. Based on their average EV/EBITDA multiple of 33.44 times, Hyzen R&M’s relative per-share valuation was 6,801 KRW. Applying a discount rate of 19.13% to 33.83%, the desired offering price was set between 4,500 KRW and 5,500 KRW.

Hyzen R&M plans to offer 3.4 million shares. Based on the desired offering price, it expects to raise approximately 15.3 billion to 18.7 billion KRW. If funds are raised at the lower end of the desired price range, 10.5 billion KRW will be allocated to facility investment and 4.4 billion KRW to operating funds.

Specifically, about 8 billion KRW will be invested in establishing assembly and testing facilities for robots and AMRs. The company explained, "To complete product development with domestic collaborative robot and mobile robot companies, produce samples, and proceed to full-scale mass production, investment in equipment for drive modules, robot assembly, and testing is necessary."

Additionally, 2 billion KRW will be used to build an automated smart factory. Through this, the company plans to reduce production costs and improve quality to enter premium markets in advanced countries, including the United States. The remaining 4.4 billion KRW will be used for R&D. Specifically, 1.8 billion KRW will be spent on materials used in actuator development, 1.6 billion KRW on establishing R&D facilities, and 1 billion KRW on hiring key R&D personnel.