[Reading the Securities Registration Statement] Will CK Solution Succeed in Its IPO Retry After Lowering Its Valuation?

Upper End of Desired Offering Price Lowered from 18,000 Won to 15,000 Won
Number of IPO Shares Cut by More Than Half, from 3,145,000 to 1,500,000

CK Solution, a specialized company in dry rooms for secondary batteries, is reattempting to list on the Korea Exchange. The company pursued an initial public offering (IPO) last year but withdrew it. The major difference from last year is that the valuation has been significantly lowered.

CK Solution was established in 2004. It is a specialized company supplying dry room systems to the secondary battery industry. A dry room is a key facility in the secondary battery manufacturing process, referring to technology that maintains air moisture content below 1% during the production of lithium-ion batteries, which are vulnerable to moisture.

As of 2023, the consolidated revenue and operating profit were KRW 215.3 billion and KRW 17.7 billion, respectively. Although revenue decreased by 20.1% compared to the previous year, operating profit turned positive. The cumulative revenue and operating profit for the first three quarters of last year were KRW 194.9 billion and KRW 12 billion, respectively, marking increases of 29.38% and 300.81% year-over-year. This was due to strong sales in the secondary battery sector.

CK Solution proceeded with an IPO last year. However, the re-election of then U.S. President Donald Trump increased performance uncertainties for companies related to secondary batteries. As a result, the company received poor results in demand forecasting and withdrew the listing.

The biggest change from last year is the offering price. The current desired offering price is KRW 13,500 to KRW 15,000 per share, whereas previously it was KRW 15,700 to KRW 18,000.

The reason for the lowered offering price is the decrease in the price-to-earnings ratio (PER) of comparable companies. NH Investment & Securities, the lead underwriter, used PER to calculate CK Solution’s desired offering price.

Based on the latest four quarters (LTM) net profit of KRW 17.429 billion as of Q3 2024, and applying the average PER of 10.15x from comparable companies KNSOL (11.68x) and Cowintech (8.62x), the per-share valuation was calculated at KRW 16,174.

The previous comparable companies were KNSOL (15.81x), SFA (12.27x), and Cowintech (10.08x), with an average PER of 12.72x. The LTM net profit used at that time, based on the half-year end of 2024, was KRW 21.952 billion. Ultimately, both net profit and the average PER of comparable companies decreased, leading to a lower desired offering price.

Additionally, the number of shares to be offered has also been reduced. While the IPO last year planned to offer 3.145 million shares, this time it has been cut by more than half to 1.5 million shares. With fewer shares offered, the expected fundraising amount has dropped from KRW 49.3765 billion to KRW 56.61 billion to KRW 20.25 billion to KRW 22.5 billion.

Despite significantly lowering its valuation, CK Solution still faces many challenges. The secondary battery market, where the company operates, is still experiencing a cold wind due to sluggish demand. Moreover, the IPO market downturn continues. LG CNS, once considered a major IPO, succeeded in demand forecasting among institutional investors and subscription by general investors but closed trading below the offering price on its first day on the KOSPI on the 5th of this month. Although it rose the previous day, it still remains below the offering price.