[Click eStock] "Doosan Enerbility, Shareholder Losses Expected in Split and Merger... Target Price Down"

Daishin Securities lowered the target price for Doosan Enerbility from 30,000 KRW to 26,000 KRW on the 10th, stating that existing shareholders could incur losses if the current split and merger plan is executed. The investment rating was maintained as 'Buy.'

Researcher Heo Min-ho explained, "Although the merger between Doosan Robotics and Doosan Bobcat was canceled, if the split and merger of Doosan Enerbility are to proceed, the related securities report must be resubmitted to the Financial Supervisory Service, and the schedule must be postponed."

Heo said, "The split ratio of 0.75 to 0.25 between the surviving company and the newly established company in the existing split and merger structure is based on book value, not the net asset value of each company. Since the newly established company will be merged into Doosan Robotics without a control premium for the 46.1% stake in Doosan Bobcat it holds, shareholders could face a 14.5% loss based on the Doosan Robotics stock price of 63,900 KRW on September 9, even if the Doosan Enerbility stock price rises to the stock purchase request price of 20,850 KRW."

However, the analysis is positive regarding securing an investment capacity of 1.2 trillion KRW through the split and merger. Doosan Enerbility will secure a total of 1.2 trillion KRW through debt transfer and sale proceeds from this split and merger.

Researcher Heo stated, "With the secured investment capacity, it is expected that investments will be made in facilities and research and development (R&D) for future Korean-style large nuclear power plants and SMR orders, and some financial structure improvements will be undertaken. Considering the expansion of the global nuclear power market, the competitiveness of Korean nuclear power and Doosan Enerbility, this investment is necessary to not miss highly visible growth opportunities."

He also emphasized, "However, if the Doosan Group has the will, asset sale proceeds of 435 billion KRW (at book value) and others are possible even without the split and merger. If the stock purchase request amount reaches the limit of 600 billion KRW, the plan to reduce debt and secure investment funds through business restructuring could be undermined."

He argued that for a successful business restructuring, the split and merger deal itself should not cause shareholder losses. He explained, "The split ratio between the surviving company and the newly established company should be changed to around 0.8 to 0.11 based on net asset value. When calculating the sale and merger value of the newly established company to Doosan Robotics, a control premium for the 46.1% stake in Doosan Bobcat should also be applied."

He added, "To secure investment funds for the mid- to long-term growth of the surviving company Doosan Enerbility after the split, the stock purchase request amount should be minimized. Considering the controversy over the overvaluation of Doosan Robotics stock price and the recent increased volatility in the stock market leading to uncertainty in Doosan Group's stock price, the control premium needs to exceed 5.4%."

Meanwhile, despite significant uncertainties related to the split and merger, Doosan Enerbility's competitiveness is seen as solid. He said, "Orders for the UAE nuclear power plants units 5 and 6 and two nuclear power plants in Poland are expected in 2025 and 2026," adding, "The target price downgrade reflects the downward revision of Doosan Bobcat's earnings forecast and the decline in market capitalization."