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IPO valuations

SK IE Technology’s IPO plan to get boost from ITC ruling

Apr 02, 2021 (Gmt+09:00)

SK IE Technology's EV battery separator
SK IE Technology's EV battery separator

SK IE Technology Co. (SKIET), set to make a trading debut on Korea’s main bourse in May, is expected to get a favorable review in assessing its stock valuation following the US trade panel’s ruling on a battery patent suit.

Market analysts say the battery materials subsidiary of SK Innovation Co. could follow in the footsteps of SK Group’s other affiliates, with a successful sale of shares through the initial public offering.

“The US ITC’s ruling acknowledges SK Innovation’s proprietary battery separator technology. The decision is a positive for the IPO of SKIET,” said an industry official.

On Wednesday, the International Trade Commission ruled in favor of SK Innovation in a US battery patent suit filed by LG Energy Solution Ltd., saying SK did not violate four of LG’s battery-related patents in question.

SKIET, which makes lithium-ion battery separators (LiBS), said on Wednesday it is starting the IPO process to list its shares on the Kospi market. SK Innovation and SKIET hope to raise as much as 2.3 trillion won ($2 billion) from the IPO and spend the proceeds on expanding the battery separator business.

SK Group assessed the battery separator’s enterprise value at 9.46 trillion won, but some analysts raised doubt over its valuation, saying the stock may be overvalued at that level.

ESTIMATED CORPORATE VALUE TRIPLED

SKIET’s estimated corporate value means more than a threefold increase from its assessed value of 3 trillion won in September 2020 when it attracted 300 billion won in investment from Premier Partners, a local private equity firm.

The separator maker has since announced aggressive investment plans in a bid to maximize its corporate value. SK Innovation, which owns 90% of SKIET, has 20 trillion won in market capitalization.

SK IE Technology’s IPO plan to get boost from ITC ruling

SKIET compared its corporate value with that of industry rivals such as Iljin Materials Co., POSCO Chemical Co. and China’s Yunnan Energy New Material Co. Its 9.46 trillion won value derives from an EV/EBITDA multiple of 48.1, the average multiple of those competitors.

The multiple can be translated into a price-to-earnings ratio (PER) of 100, given SKIET’s 2020 net profit of 90.7 billion won. That’s higher than the secondary battery materials industry’s average PER of 70-80 times.

SK INNOVATION ALSO PUTS UP STAKE IN IPO

SKIET plans to float 21.39 million shares, or 30% of its total outstanding shares, on the main bourse through the IPO, with an indicative price range of 78,000 won and 105,000 won. If the IPO is priced at the top end of the band, its market capitalization will reach 7.5 trillion won.

For the IPO, SKIET plans to issue 8.55 million new shares, while SK Innovation will sell 12.83 million of its SKIET shares. With the sale of 12.83 million shares that amount to a 22.7% stake, SK Innovation will be able to secure 1.35 trillion won in operating funds.

Earlier this week, SKIET said it will build two additional battery separator plants in Poland to meet the rising demand for electric car batteries. The project, valued at around 1.2 trillion won, marks SKIET’s single largest investment.

SKIET was the first South Korean company to develop lithium-ion battery separators in 2004, and the first in the world to develop the sequential stretching process technology in 2007.

For the IPO, SKIET plans to accept subscriptions for 5.3 million shares from individual investors Apr. 22-23.

Write to Ye-Jin Jun at ace@hankyung.com

In-Soo Nam edited this article.

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