[Stock of the Week] SeAH Besteel Holdings, From Steel to Space... Spotlight on U.S. Plant

U.S. Special Alloy Plant to Begin Full-Scale Operations Next Year
“Anticipation Builds for SpaceX IPO-Related Gains”
Surges 80% in Just Three Weeks... “Still Not in Overvalued Territory”

Editor's NoteTo all retail investors dreaming of successful investments: How well do you really know the stocks you buy with your own money? In an online environment flooded with unfiltered information, The Asia Business Daily aims to be your hands, feet, eyes, and ears, delivering accurate information about companies. Each week, we focus on companies that ranked among the most searched stocks on FnGuide, a financial information provider, and provide not only basic information but also analysis of related companies such as partners, clients, and investors. We will explain the company’s financial status, performance, and future value in an easy-to-understand way. We bring you this week’s stock of interest, aptly named ‘Stock of the Week’.

Despite this year’s “KOSPI bull market,” domestic steel stocks have not enjoyed strong gains. This is due to a combination of negative factors, including high tariffs imposed by the United States and the influx of low-priced Chinese products. The company that disrupted this trend is SeAH Besteel Holdings, a traditional specialty steel company.

Last week, reports related to SeAH Besteel Holdings dominated the list of most-viewed reports by financial information provider FnGuide. The company has recently attracted investor attention by expanding beyond its existing business areas into aerospace, aviation, and defense materials. Securities analysts believe that the start of operations at its U.S. special alloy plant could trigger a full-scale revaluation of the company’s value.

From Steel Holding Company to “Special Alloy Platform”

In 2022, SeAH Besteel Holdings transitioned into a specialized intermediate holding company for SeAH Group’s specialty steel business through a physical division. Currently, its major subsidiaries include SeAH Besteel, SeAH Changwon Specialty Steel, and SeAH Aerospace & Defense Material. The company has built a business portfolio centered on specialty steel and special alloy materials.

Special alloys are mainly used in the aerospace, space launch vehicle, defense, and medical industries. These materials are made by combining iron with alloys such as nickel, titanium, and cobalt, and must withstand high-temperature and high-pressure environments, resulting in high technological entry barriers. Rather than simple price competition, certification, reliability, and long-term supply contracts serve as key competitive advantages in this market.

SeAH Besteel is the main cash cow, supplying specialty steel for automobiles, shipbuilding, and industrial machinery, while SeAH Changwon Specialty Steel is responsible for diversifying the portfolio by increasing the proportion of high-value-added products such as stainless steel bars and wire rods. The subsidiary that has recently attracted the most market attention is SeAH Aerospace & Defense Material, acquired in 2019.

SeAH Besteel Holdings has been accelerating its business transformation from a steel-focused structure to advanced materials for aerospace and defense. As the global aircraft materials market entered a phase of structural growth, the company made preemptive investments to respond to demand and secure future growth engines. According to the Korea Aerospace Industries Association’s “Global Aerospace Materials Market Report,” the global aircraft materials market is expected to grow by about 132%, from 44 trillion won in 2022 to 102 trillion won in 2032.

“SST, the Special Alloy Plant in Texas, USA, Is the Key Driver for Stock Price Growth”

The biggest focus is SeAH Superalloy Technologies (SST), a special alloy plant under construction in Texas, USA. The company is investing about 213 billion won in this plant, which is targeted for completion in the first half of next year. The site covers approximately 180,000 square meters-equivalent to 25 soccer fields-with an annual production capacity of 6,000 tons.

Park Hyunwook, a researcher at Hyundai Motor Securities, commented, “In the steel and materials sector, it is common for the share price to reflect the expansion of production capacity even before the plant is completed. Expectations for the operation of SST, scheduled for completion in June next year, are likely to be reflected in SeAH Besteel Holdings’ share price.”

The fact that production is taking place in the United States is also significant. The aerospace and defense industries are directly linked to national security, making regional supply chain stability critical. The U.S. defense and space industries place a strong emphasis on domestic production, and many believe that there is a structural shortage of special alloy supply within the United States.

Lee Jaekwang, a researcher at NH Investment & Securities, stated, “Since COVID-19 and the war in Ukraine, supply restrictions and increased demand for both commercial and military aircraft have led to a continued shortage in the special alloy market. This is evident from the strong performance of U.S. special alloy companies such as ATI Materials and Carpenter Technology. Both companies reported during briefings that they currently have a significant backlog of orders.”

Spotlight on SpaceX Connection: “Valuation Not in Overvalued Range Yet”

Additionally, the market for aerospace and defense special alloys is a supplier-dominant market with a limited number of global suppliers. Once a company is incorporated into the supply chain, it typically leads to long-term contracts, resulting in high earnings visibility. SeAH Aerospace & Defense Material has already signed long-term supply agreements (LTAs) with global aircraft manufacturers.

Some in the securities industry also draw a connection between SST and SpaceX, the U.S. space development company. Researcher Lee Jaekwang said, “Although nothing has been officially disclosed, it is believed that SeAH Besteel Holdings’ investment in U.S. special alloy facilities began with business with SpaceX. As SpaceX faced difficulties in securing a timely supply of special alloy materials, one of the suppliers it sought was SeAH Changwon Specialty Steel, and this led to investment in local facilities.”

He added, “The space industry is not just a passing theme but has entered a phase of long-term growth. The market for special alloys for aerospace is characterized by ongoing supply shortages, and the limited number of new entrants works in favor of SeAH Besteel Holdings.”

What concerns investors is that SeAH Besteel Holdings’ share price surged by about 80% this month following news of SpaceX’s IPO plans. The share price jumped from 27,550 won (closing price on the 1st) to 51,300 won on the 22nd. As of the closing price of 48,650 won on the 29th, the price-to-book ratio (PBR) stands at the high end of the 0.8x range.

However,the securities industry remains positive on the company’s valuation (stock price relative to corporate value). Researcher Lee Jaekwang said, “Considering the PBR and other metrics, it is not in the overvalued territory. Given that Carpenter Technology’s market capitalization is based on a production capacity of 100,000 tons of special alloy, SST’s potential value could be estimated at up to 1 billion dollars (about 1.5 trillion won),” he explained.