[Reporter Reading Securities Report] LK Chem's Strong Performance Continues... Expanding Facilities Through IPO

Cumulative Sales of Semiconductor Materials Specialist Reach 19.8 Billion KRW in Q3 Last Year... Up 94% Year-on-Year
"All Funds Raised to Be Used for Facility Investments"

Semiconductor materials company LK Chem has submitted a securities registration statement and is officially starting the public offering process. The company has been experiencing high growth every year. Its Q3 performance last year already surpassed the full-year results of 2023. Moreover, its profit margin exceeds 40%. The company plans to use all the funds raised through this public offering to expand its facilities and continue its high growth.

LK Chem was established in November 2007. It manufactures and sells chemical materials called precursors and ligands used in semiconductor thin film deposition processes. Its main products are CP ligands, PCP ligands, and DIS precursors, which are raw materials for High-k and Low-k semiconductor thin film deposition materials.

High-k helps efficiently store electrons and operate stably in components such as DRAM capacitors. Low-k forms a thin insulating film inside semiconductors, enabling fast signal transmission and stable performance even in complex structures.

LK Chem’s greatest strength lies in its performance. Consolidated sales increased from 9.6 billion KRW in 2021 to 16.1 billion KRW in 2023. Operating profit jumped from 1.9 billion KRW to 5.6 billion KRW during the same period. The cumulative sales and operating profit for Q3 last year were 19.8 billion KRW and 8.9 billion KRW, respectively, marking increases of 94.5% and 104.4% compared to the same period the previous year. Notably, the operating profit margin in Q3 last year was 44.71%, significantly surpassing the industry average of 6.22%.

The company expects growth to continue. In its securities registration statement, it explained, “The global semiconductor market is expected to grow due to the emergence of generative artificial intelligence (AI). The High-k materials market will continuously increase due to the miniaturization and advancement of semiconductor processes.”

LK Chem’s desired public offering price is between 18,000 and 21,000 KRW per share. The lead underwriter, Shin Young Securities, used the price-to-earnings ratio (PER) to determine the offering price. Comparable companies include DNF, Lake Materials, JI Tech, and Soulbrain. Their average PER is 23.42 times.

Using this, the per-share valuation was calculated at 29,883 KRW. Applying a discount rate of 29.73% to 39.76% resulted in the desired public offering price. For reference, this discount rate is higher than the average discount rate of 21.61% to 33.37% for newly listed KOSDAQ companies from 2023 to last year. The company explained that it comprehensively considered recent domestic and international macroeconomic environments and external variables that could intensify stock market volatility.

LK Chem plans to offer a total of 1 million shares, aiming to raise 18 billion to 21 billion KRW. After deducting issuance costs based on the lower end of the offering price, 17.664 billion KRW will be used entirely for facility investments. Specifically, 4 billion KRW each will be invested in securing land and constructing buildings for the third plant, totaling 8 billion KRW. Additionally, 4 billion KRW will be allocated to production facilities for semiconductor device miniaturization process materials, and 5.6 billion KRW will be used for production facilities of perovskite materials for next-generation solar industries.