[Reporter Reading Securities Report] Haesung Optics Issuing 70% of Total Shares... "Concerns Over Stock Value Dilution"

Raising 11.4 Billion KRW for CB Repayment and Facility Investment
Major Shareholder's Stake to Decrease from 25% to 22% After Capital Increase

Haesung Optics is raising 11.4 billion KRW in funds, equivalent to half of its total market capitalization. As this is a large-scale fundraising, 70% of the total shares will be issued as new shares. Share dilution appears inevitable.

According to the Financial Supervisory Service's electronic disclosure system on the 27th, Haesung Optics plans to proceed with a paid-in capital increase through a rights offering followed by a general public offering of unsubscribed shares. The company will issue 18 million shares at 636 KRW per share, raising a total of 11.448 billion KRW.

Haesung Optics is a specialized manufacturer of optical lenses and optical element products. Initially, it focused on producing camcorder, digital camera, DVD pickup lenses, and mobile lens assembly (Assy) products. Later, it developed and produced high-resolution optical lens modules for smartphones. Following lens modules, the company expanded its business to include mobile camera modules, as well as autofocus (AF) and optical image stabilization (OIS) actuators.

The company plans to use the funds raised through this capital increase for debt repayment, facilities, and operations. Specifically, 2.5 billion KRW will be used to repay the 12th series convertible bonds (CB), 5.256 billion KRW will be invested in key equipment for the VCM (OIS) business division, and 3.692 billion KRW will be allocated to raw material costs and labor expenses.

Through facility investments, the company aims to expand sales. Currently, Haesung Optics' performance is sluggish. On a consolidated basis, cumulative sales for the third quarter of last year were 82.74384 billion KRW, down 1.98% compared to the same period last year. Operating profit turned to a loss compared to the previous year, recording -4.56851 billion KRW. The company plans to increase sales and improve profitability through facility investments in the VCM (OIS) business division.

However, share dilution is expected to be unavoidable due to this capital increase. Currently, Haesung Optics has a total of 25,453,198 shares. The newly issued shares will account for 70.72% of the total. Share dilution is inevitable. The company also explained in its securities registration statement that "at the time of additional listing of new shares, there is a very high possibility that investors may suffer economic losses due to share price dilution caused by a large volume of shares being released at once."

Additionally, the largest shareholder's stake is expected to decrease. Haesung Optics' largest shareholder is OH Almus Restructuring Investment Association No.1, currently holding 25.14%. The largest shareholder plans to participate in the subscription with about 2 billion KRW using cash on hand or borrowings. If the largest shareholder participates as expected by the company, the post-capital increase shareholding ratio will be 21.97%.