HVM Co., Ltd. (KOSDAQ: 295310) _ The half-year in which space materials became 66% of revenue
HVM Co., Ltd. (KOSDAQ: 295310)
The half-year in which space materials became 66% of revenue
Disclosure
Who wrote this, and why A private analysis of public regulatory filings, written to set out what the filings say so that a reader can follow the sources and either agree or disagree. It was not produced for, or at the request of, any company, client or sponsor.
What this document is not
- Not investment advice. Nothing here is a recommendation, an offer or a solicitation to buy or sell any security.
- Not directed at any particular person or jurisdiction. Reading it creates no advisory or client relationship. Readers should consult their own advisers before acting.
- The author is not a licensed investment firm or investment adviser in any jurisdiction and does not provide individual advice.
- Investment decisions and their outcomes rest with the reader. Loss of principal is possible.
Sources and accuracy
- Built from public filings (DART), company materials and press reports, as cited in the text.
- The author believes these sources are reliable but does not warrant their accuracy or completeness. Errors of transcription or interpretation are possible.
- As of 2026-09-14. Filings and results after that date are not reflected, and the author does not undertake to update this document.
Forward-looking statements Section 9 sets out scenarios for 2029, and other passages describe possible futures. These are the author's estimates built on stated assumptions. They are neither forecasts of what will happen nor company guidance, and actual results may differ materially.
Positions and compensation
- At the time of writing the author held no position in the security discussed, and received no sponsorship, fee or other consideration from the company discussed, its IR agency, or any other interested party.
- The author may buy or sell this security at any time after the publication date, without notice and without updating this document.
Translation An English version of a Korean-language report. Where the two differ, the Korean original prevails.
Currency Converted at a single rate of USD 1 = KRW 1,400. "KRW bn" means billions of won and "USD m" means millions of US dollars. Figures are rounded, so components may not sum exactly to totals.
Korea context (for readers new to this company)
- What it does: makes special alloy materials (ingots and semi-finished products) to order in vacuum melting furnaces it builds itself
- Where it trades: KOSDAQ, Korea's growth-stock board (ticker 295310); listed in June 2024 under the technology-growth track
- Reporting: single legal entity with no subsidiaries; fiscal year = calendar year; filings on DART, Korea's electronic disclosure system run by the Financial Supervisory Service
- Who it sells to: distributors and end users, not directly to launch-vehicle operators
- Korean-specific terms used below: DART receipt numbers, half-year report, KOSDAQ technology-growth listing
- Currency: KRW figures with fixed-rate USD conversions (see Currency above)
Tags — FACT supported by original filings / COMPANY company statement / VIEW the author's judgment
1. Business model
A single manufacturing segment that makes special alloy materials (ingots and semi-finished products — melted metal solidified into blocks, and the semi-finished products made from them) to order, with barriers to substitution that differ sharply by product line.
FACT By product line (revenue in KRW bn · half-year report 20260814004157 · annual report 20260320001188)
| Product line | H1 2026 (share) | 2025 | Customer | Difficulty of substitution |
|---|---|---|---|---|
| Ni-based metals | 24.9 (47.5%) | 23.8 | Aerospace metals distributor | High — certification and quality history required |
| Fe-based metals | 17.5 (33.3%) | 29.8 | Distributors and processors, displays | Medium |
| Cu-based metals | 7.0 (13.4%) | 9.3 | Industrial goods | Low |
| Sputtering targets | 2.8 (5.4%) | 3.3 | Target makers | Medium |
| Other | 0.2 (0.4%) | 0.4 | – | – |
- FACT The vacuum melting furnaces (VIM vacuum induction melting, VAR vacuum arc remelting, ESR, PACHM, EBCHM and others) are built and operated in house. Payment terms are 30 days after delivery.
- FACT The sales route is "the company to its customers (distributors and end users)". There is no direct sale to the final user (launch-vehicle companies). Reporting is on a single manufacturing segment.
- FACT Company history — founded in 2012 as Korea Vacuum Metallurgy (the company records its founding as 2003), renamed to the present name in January 2024, listed on KOSDAQ in June 2024 under the technology-growth track. 153 employees (24 in research), a single legal entity with no subsidiaries. Chief executive Moon Seung-ho (in office since founding).
2. Industry and structural demand
Demand looks structural, but what the company is exposed to is not "the industry" — it is one customer's order schedule.
FACT Revenue by end market (KRW bn · half-year report 20260814004157 · annual report 20260320001188)
| End market | 2023 | 2024 | 2025 | H1 2026 |
|---|---|---|---|---|
| Space | 5.1 | 7.5 | 39.5 | 34.5 |
| Aerospace and defence | 5.7 | 9.2 | 7.4 | 5.8 |
| Semiconductors (electrical and electronic) | 11.8 | 10.6 | 12.3 | 10.6 |
| Petrochemicals, energy and plant | 18.9 | 17.8 | 7.3 | 1.5 |
| Total | 41.5 | 45.1 | 66.5 | 52.4 |
- VIEW Petrochemicals fell by about as much as space rose (KRW 18.9bn (USD 13.5m) to KRW 1.5bn (USD 1.1m)). This is not "growth on top of growth" but the result of shifting limited melting capacity to the higher-margin line. COMPANY The company describes it in the same terms, as "a strategic choice to concentrate on space, where profitability and growth are higher".
- COMPANY The demand evidence the company cites — 263 launches worldwide in 2024, falling launch costs from reusable vehicles, and a domestic target of four launches by 2027. It also cites market size figures (global advanced-materials special metals of KRW 8,870bn (USD 6,335.7m) in 2021 rising to KRW 16,310bn (USD 11,650.0m) in 2028, among others), all of them second-hand citations of outside research houses.
- VIEW A large market does not by itself set the size of this company's revenue. 2025 revenue of KRW 66.5bn (USD 47.5m) is around 0.1% of even the single Ni-based market the company cites. Launch counts and materials demand are connected fairly directly, but that connection can be cut depending on which supplier a particular customer uses.
- FACT Domestic localisation of thin-film deposition raw materials is lowest for PVD (physical vapour deposition) at 2%. That said, revenue in this segment has been flat for three years in a band of 10.6 to 12.3 (KRW bn; the 2025 figure was KRW 12.3bn (USD 8.8m)), so the opening has not yet been realised.
3. Competitive advantage / moat
There are two moat candidates — the certification barrier and the scale of the furnaces — and only half of that is visible in the numbers.
| Moat candidate | Where it should show up if real | Does it show up |
|---|---|---|
| Certification and quality history | No customer attrition; prices held or rising | Partly. Ni-based selling price per kg of KRW 63,937 (USD 45.67) in 2024, then 66,193, then 68,787 in H1 2026 FACT |
| Cost and scale | Gross margin rises as revenue rises | Broken. 20.8% for the half year, 15.7% in Q2 alone (27.3% in Q1) FACT |
| Patents and technology | Margin premium against competitors | Cannot be verified. The 18 patents are a fact, but the link to margin cannot be tested |
| Ability to pass on prices | Selling prices rise when input prices rise | A lag is visible. Nickel purchase prices up 14.5% against Ni-based selling prices up 3.9% FACT |
Four entry barriers secured so far
- (1) VIEW Approval in March 2026 as a "Tier 1 raw-material flight supplier" after an audit by a US private space company — confirmed only by the company's announcement and press reports (Etoday, Prime Economy, Mar 24, 2026); it does not appear in DART filings
- (2) COMPANY Supplying Ni-based and Cu-based materials since passing an audit by a leading overseas launch-vehicle company in 2022
- (3) COMPANY Completion in June 2023 of a material suitability evaluation by KAI (Korea Aerospace Industries) for titanium of 5 inches and thicker (recorded by the company as a domestic first)
- (4) FACT 18 registered patents, in-house construction of vacuum melting furnaces, and the first commercial electron-beam melting equipment installed in Korea
- VIEW Items (3) and (4) took time to build and are hard to copy. But the qualifications in (1) and (2) are granted by the customer, so if the customer changes its sourcing policy the company cannot control the outcome. This moat is therefore a mix of "what we built" and "what the customer lent us", and for (1) even the primary source is missing.
- VIEW The second row of the table above breaking down is the most important finding of this half year. Margins should improve when volume doubles; they moved the other way.
4. Customers and competition
Customer concentration has jumped from 11% to 66% in two years. That is the growth story and, at the same time, the single largest risk in this name.
FACT Single customers above 10% of revenue
| Customer | 2024 | 2025 | H1 2026 |
|---|---|---|---|
| Customer B | 11.19% | 44.28% | 65.87% (KRW 34.53bn (USD 24.7m)) |
| Customer A | 12.42% | 8.93% | 0.00% |
| Customer C | 10.67% | 1.42% | 9.84% |
| Customers D, E and F | 5–11% each | 0–12.4% | – |
- VIEW Customer B's KRW 34.53bn (USD 24.7m) is effectively identical to the KRW 34.54bn (USD 24.7m) recorded for the space end market. It is reasonable to read the space segment as one customer.
FACT Four space supply contracts in 2026 — the counterparty is described identically in each as an "aerospace metals distributor" (receipt numbers 20260102900287, 20260619900580, 20260625900304; the receipt number for the Jan 9, 2026 contract was not obtained)
| Filing date | Amount | Term | Progress |
|---|---|---|---|
| Jan 2, 2026 | KRW 7.56bn (USD 5.4m) | to Nov 30, 2026 | KRW 2.29bn (USD 1.6m) delivered, KRW 830m (USD 0.59m) received |
| Jan 9, 2026 | KRW 18.56bn (USD 13.3m) | to Nov 2, 2026 | KRW 12.01bn (USD 8.6m) delivered, KRW 7.87bn (USD 5.6m) received |
| Jun 19, 2026 | KRW 16.71bn (USD 11.9m) | to Dec 9, 2026 | Not started |
| Jun 25, 2026 | KRW 7.75bn (USD 5.5m) | to May 1, 2027 | Not started |
- VIEW Of the two January contracts (KRW 26.1bn (USD 18.6m)), only KRW 8.7bn (USD 6.2m), or 33%, has been received in cash. Contracts are disclosed, but the cash arrives much later. This is the structural background to negative operating cash flow.
- COMPANY The company names ATI, Hitachi Metals, Haynes International, VDM Metals and Special Metals as competitors and records that they "lead the market on technology". Domestic peers are described only as "a small number of companies". VIEW The list is available but there is no comparison of prices or lead times, so this table is fairer read as an item on the threat side than as evidence of a moat.
5. Revenue and profit drivers
Growth is almost entirely volume (Q) with almost no movement in price (P), and the company has entered a stretch where margins do not follow volume.
FACT (half-year report 20260814004157 · annual report 20260320001188)
| Item | 2024 | 2025 | H1 2026 |
|---|---|---|---|
| Capacity | 17,820 tonnes | 19,620 tonnes | 12,510 tonnes (half year) |
| Output | 4,257 tonnes | 7,648 tonnes | 5,476 tonnes |
| Utilisation | 23.9% | 39.0% | 43.8% |
| Item | Q1 2026 | Q2 2026 |
|---|---|---|
| Revenue | KRW 23.27bn (USD 16.6m) | KRW 29.15bn (USD 20.8m) |
| Gross margin | 27.3% | 15.7% |
| Operating profit (margin) | KRW 4.42bn (USD 3.2m) (19.0%) | KRW 2.01bn (USD 1.4m) (6.9%) |
- VIEW Revenue grew 25% while operating profit halved. If fixed-cost leverage were working it would be the other way round. There are three candidate causes, and they are different in kind.
| Candidate cause | Kind | Does time solve it |
|---|---|---|
| (1) Input price rises not yet in selling prices | Timing lag | Yes — prices catch up over the following quarters |
| (2) Fixed costs of the second plant now fully recognised | Temporary | Yes — diluted as utilisation rises |
| (3) Worse product mix (lower-margin volume) | Structural | No |
- VIEW The filings do not distinguish which of the three it is. Two of the three are the kind that time solves, so the 30% probability placed on the Bear case in Section 9 is a conservative allocation based on cause (3). If the cause turns out to be (1) or (2), that probability should come down.
- VIEW Utilisation of 43.8% cuts both ways — there is still room in the vessel, and there is not yet enough volume to share the fixed costs.
6. Quality of earnings
Profit has risen, but cash has not come in for four years.
FACT (KRW bn · half-year report 20260814004157 · annual report 20260320001188)
| Year | Revenue | Operating profit | Net profit | Operating cash flow |
|---|---|---|---|---|
| 2023 | 41.5 | 3.7 | −6.1 | +0.9 |
| 2024 | 45.1 | −6.8 | −8.4 | −14.0 |
| 2025 | 66.5 | 5.8 | 12.6 | −8.8 |
| H1 2026 | 52.4 | 6.4 | −5.6 | −5.0 |
| Cumulative | – | – | – | −26.9 |
- FACT The composition of 2025 net profit of KRW 12.6bn (USD 9.0m): operating profit of KRW 5.8bn (USD 4.1m) plus financial income of KRW 6.8bn (USD 4.9m) (valuation gains on derivatives and similar items) plus an income tax credit of KRW 3.1bn (USD 2.2m). Only KRW 5.8bn (USD 4.1m) came from operations; the rest is accounting profit.
- FACT The H1 2026 net loss of KRW 5.6bn (USD 4.0m) reflects a KRW 12.27bn (USD 8.8m) valuation loss on convertible bond derivatives (no cash outflow). Interest expense was KRW 3.73bn (USD 2.7m).
- FACT Where the cash went — of KRW 15.75bn (USD 11.2m) of working capital outflow in the half year, KRW 9.26bn (USD 6.6m) was the increase in inventory. The inventory balance is KRW 60.89bn (USD 43.5m) (KRW 51.63bn (USD 36.9m) at the end of 2025). The increase in trade receivables was only KRW 1.5bn (USD 1.1m).
- VIEW Against an annualised cost of sales of about KRW 83bn (USD 59.3m), inventory days are about 268. This report does not have a reference point for judging whether that is long or short. Advance securing of raw materials and long lead times are in the nature of the superalloy business, so without comparing inventory days at overseas peers (ATI, Haynes and others) it cannot be called "abnormally long". What is certain is only the direction — inventory days are rising, and the larger revenue becomes, the more cash is tied up.
- FACT The auditor was Samjong in 2023, Donghyun in 2024 and Samil in 2025. For two consecutive years, 2024 and 2025, the key audit matter was "occurrence of revenue", and the audit opinion was unqualified in all three years (annual report 20260320001188).
- VIEW A key audit matter identifies what the auditor looked at most carefully that year; it does not mean a problem was found.
7. Balance sheet and dilution
There is plenty of money. It came from borrowing rather than from earnings, and repayment can be demanded from 2028.
FACT As of Jun 30, 2026 (half-year report 20260814004157) — total liquidity of about KRW 100.8bn (USD 72.0m) (cash 46.3, short-term financial instruments 31.5, financial assets 23.0; KRW bn). On the borrowing side, short-term 22.5, long-term 8.9 and bonds 0.4 (KRW bn), plus convertible bonds with a face value of KRW 132bn (USD 94.3m), giving net debt of about KRW 63bn (USD 45.0m). Total equity is KRW 140.3bn (USD 100.2m) and the debt-to-equity ratio is 109.6%.
- FACT Purchases of property, plant and equipment in the half year were KRW 6.9bn (USD 4.9m). Of the KRW 92bn (USD 65.7m) of convertible bonds issued in April 2026, KRW 50bn (USD 35.7m) is earmarked for the third plant (material event filing 20260402002584). As of Jun 30, KRW 99.97bn (USD 71.4m) was still unused and held in deposits and financial instruments, so spending has not begun.
- FACT The chief executive has provided a personal guarantee of KRW 15.82bn (USD 11.3m) on company borrowings, and property, plant and equipment of KRW 58bn (USD 41.4m) is pledged as collateral.
Potential dilution and its character FACT
| Item | Shares | Conversion / exercise price | Character |
|---|---|---|---|
| First convertible bond, remaining KRW 32.65bn (USD 23.3m) | 1,011,369 | KRW 32,278 (USD 23.06) | Conversion likely (KRW 6.16bn (USD 4.4m) already converted in August, filing 20260811900863) |
| Second convertible bond (KRW 92bn (USD 65.7m)) | 1,011,923 | KRW 90,916 (USD 64.94) | Debt for now |
| Stock options | 296,500 | 12,800 to KRW 47,759 (USD 34.11) | Only some are inside the exercise threshold |
| Total | about 2,319,000 | – | About 14,630,000 shares if fully diluted (+18.8%) |
- VIEW The first and second issues are opposite in character. The first is close to equity in substance; the second, if the conversion price is not reached, is debt of KRW 92bn (USD 65.7m) to be repaid in cash from April 2028. Section 9 fixes one outcome for each of them in each scenario.
- VIEW The second issue has no refixing clause (a mechanism that lowers the conversion price), which favours existing shareholders. Large dilution at a low price is blocked.
8. Management, capital allocation and the shape of the filings
The shareholding is stable and family members bought recently, but cash has never been returned to shareholders.
- FACT The largest shareholder, Moon Seung-ho, together with related parties holds 34.91% (as of Aug 31, 2026, major shareholding report 20260901000211); the second largest shareholder, Choi Jae-young, holds 8.0%.
- FACT Between Aug 25 and Aug 28, 2026, two children of the chief executive acquired 22,900 shares on the market (about KRW 1.1bn (USD 0.79m)). Separately, on Jul 24, 2026 the chief executive pledged 219,781 of his own shares for a KRW 5bn (USD 3.6m) loan (limit KRW 15bn (USD 10.7m), maintenance ratio 170% — how many times the borrowed amount the collateral must be worth — maturing Jan 20, 2027).
- FACT No dividend was paid in 2023, 2024 or 2025. There is no history of share buybacks or cancellations.
- FACT Investment was funded by raised money rather than earned money — an IPO raise of KRW 44.2bn (USD 31.6m) in 2024, the first convertible bond of KRW 40bn (USD 28.6m) in 2025 and the second of KRW 92bn (USD 65.7m) in 2026. Cumulative operating cash flow over the same period was −KRW 26.9bn (−USD 19.2m).
- FACT Among the 51 filings of the past twelve months there were no lawsuits, no debt guarantees, no related-party trading with the largest shareholder and no change of control. Instead, convertible bonds of KRW 92bn (USD 65.7m) (filing 20260402002584), short-term borrowings of KRW 10bn (USD 7.1m) (filing 20260618900592) and a stock option grant (29 people, 139,000 shares, exercise price KRW 47,759 (USD 34.11), filing 20260831001436) fell in the same year.
- VIEW What the company needs most right now is cash rather than profit, and the shape of the filings shows it.
9. Bull / Base / Bear scenarios
9-1. Where the revenue figures come from (derivation)
VIEW Two measured anchors — (1) capacity of 25,020 tonnes a year and (2) the realised price in H1 2026 of KRW 52.4bn (USD 37.4m) of revenue divided by 5,476 tonnes of output, or about KRW 9.57m (USD 6,836) per tonne (KRW 9.5m (USD 6,786) when rounded). Therefore the revenue ceiling of the existing plant alone is 25,020 tonnes at about KRW 9.5m (USD 6,786) per tonne, or about KRW 238bn (USD 170.0m).
| Scenario | Existing plant | Third plant | 2029 revenue | Nature of the basis |
|---|---|---|---|---|
| Bull | Full utilisation, KRW 238bn (USD 170.0m) | +KRW 142bn (USD 101.4m) | KRW 380bn (USD 271.4m) | The existing plant is derived from measured data; the third plant's contribution is pure assumption (the scale of the expansion is not disclosed) |
| Base | 80% utilisation, KRW 190bn (USD 135.7m) | +KRW 40bn (USD 28.6m) | KRW 230bn (USD 164.3m) | Half derived from measured data, half assumption |
| Bear | Current 43.8% utilisation held, KRW 104bn (USD 74.3m) | 0 | KRW 104bn (USD 74.3m) | Almost entirely derived from measured data (the current state simply continuing) |
- VIEW Put plainly — the Bear case is the firmest and the Bull case the softest. Because the scale and timing of the third plant are not disclosed, 37% of Bull revenue is a number added without a basis.
9-2. The fate of the convertible bonds by scenario (fixed one way)
VIEW A convertible bond removes debt if it becomes equity and causes no dilution if it stays debt. Both cannot be reflected at once, so one outcome is fixed for each scenario.
| First issue (conversion price KRW 32,278 (USD 23.06)) | Second issue (conversion price KRW 90,916 (USD 64.94)) | Interest expense | |
|---|---|---|---|
| Bull | Converted | Converted | 0 |
| Base | Converted | Not converted, stays debt | KRW 7.5bn (USD 5.4m) a year deducted |
| Bear | Not converted | Not converted, stays debt | KRW 7.5bn (USD 5.4m) a year and repayment pressure in 2028 |
9-3. Scenario table
| Scenario | Assumptions | 2029 revenue / margin | Operating profit → net profit | Probability |
|---|---|---|---|---|
| Bull | Customer B orders growing 40%+ a year, third plant running in 2028, margin recovering to 19% | KRW 380bn (USD 271.4m) / 19% | KRW 72.2bn (USD 51.6m) → KRW 56.3bn (USD 40.2m) | 25% |
| Base | Space growth continues but margin pressure at the distribution stage persists, third plant running in 2029, margin settling at 15% | KRW 230bn (USD 164.3m) / 15% | KRW 34.5bn (USD 24.6m) → (interest KRW 7.5bn (USD 5.4m)) → KRW 21bn (USD 15.0m) | 45% |
| Bear | Customer B diversifies and orders stop, inventory write-downs, early redemption of the convertible bonds in 2028 leading to a rights issue (new shares issued for cash) | KRW 104bn (USD 74.3m) / 6% | KRW 6.2bn (USD 4.4m) → around break-even after interest | 30% |
- VIEW A tax rate of 22% was applied.
9-4. Options given no value
COMPANY Items the company records as developed or approved but which appear neither in the revenue lines nor in any mass-production schedule.
| Item | How far it has come | Why no value was assigned |
|---|---|---|
| KAI titanium (5 inches and thicker) | Material suitability evaluation completed (June 2023) — the furthest along | No mass-production schedule or contract filing |
| Gas turbine blade material for power generation | Recorded as developed under a government project | Customer approval stage unconfirmed |
| FMM (fine metal mask, the metal mask used for organic light-emitting diodes) invar alloy | Recorded as developed | As above |
| Hydrogen piping and fuel cell separator material | Recorded as developed | As above |
| Ta (tantalum) sputtering targets | Joint research under way | Development incomplete |
- VIEW None of the five is included in the revenue figures above. KAI titanium is the furthest along in approval and was kept only as a narrative premise for the Bull case, not converted into revenue. Value will be assigned when either a supply contract filing or a new product revenue line appears. This is one reason the Bull probability is held at 25%.
10. Key catalysts (dated items only)
| Date | Event | Why it matters |
|---|---|---|
| Mid-November 2026 | Q3 report | (1) operating cash flow (2) whether the Q2 margin drop was temporary — the most important |
| Nov 30, 2026 | Delivery deadline of the Jan 2 contract (KRW 7.56bn (USD 5.4m)) | Actual delivery rate against contract |
| Dec 9, 2026 | Delivery deadline of the Jun 19 contract (KRW 16.71bn (USD 11.9m)) | The core volume of the second half |
| Jan 20, 2027 | Maturity of the chief executive's collateralised loan | Extension or repayment |
| Apr 10, 2027 | Second convertible bond conversion window and company call option open | When dilution can start |
| Jan 28, 2028 | First convertible bond early redemption right opens | Balance of KRW 32.6bn (USD 23.3m) |
| Apr 10, 2028 | Second convertible bond early redemption right opens | KRW 92bn (USD 65.7m) cash repayment risk |
Three signals without dates that can be checked every quarter — (1) the change in the order backlog (contracted but not yet delivered volume) of KRW 63.08bn (USD 45.1m), (2) the new facility investment filing for the third plant and the record of how the KRW 50bn (USD 35.7m) is spent, and (3) amended filings extending contract terms. VIEW The supply contract filings state that any change of term will be disclosed in an amended filing, so delays must surface as amended filings. Because no date has been disclosed for the start or completion of the third plant, it is demoted from a catalyst to a scenario assumption.
11. Key risks
| Area | Risk | How it unfolds / impact |
|---|---|---|
| Business | Customer B stops or cuts orders | If no new contract is filed for two consecutive quarters, the backlog of KRW 63.1bn (USD 45.1m) runs down and quarterly revenue falls below KRW 20bn (USD 14.3m) — 66% of revenue disappears |
| Business | Margin stuck in the mid-teens | Annual operating profit of KRW 20bn (USD 14.3m) falls to the KRW 8bn (USD 5.7m) range |
| Business | Withdrawal or change of customer-granted qualifications (Tier 1, audit) | A variable the company cannot control — no way for an investor to verify |
| Finance | Early redemption of KRW 92bn (USD 65.7m) of convertible bonds in April 2028 | If the conversion price of KRW 90,916 (USD 64.94) is not reached, bondholders have a strong incentive to demand cash repayment, leading to a rights issue or reissued bonds at a lower conversion price |
| Finance | Slow turnover or write-down of KRW 60.9bn (USD 43.5m) of inventory | Valuation losses possible on volume made to a specific customer's specification (currently a contingent liability) |
| Finance | Reversal of deferred tax assets | The KRW 3.1bn (USD 2.2m) income tax credit in 2025 is an asset recognised in advance on the assumption of future profits. If the profit outlook turns down, as in the Bear case, that asset is reversed and an additional loss arises. There is no cash outflow, but equity falls |
| Governance | The chief executive's collateralised loan (limit KRW 15bn (USD 10.7m)) | Maintenance ratio 170% — if the collateral condition is not met, additional collateral or disposal of the collateral |
| Regulation | Changes in export controls on space and defence materials | Cannot be verified — insufficient evidence |
12. The bear case, put at its strongest (steelman negative)
The strongest argument available to someone arguing the bear case — VIEW
"65.9% of H1 2026 revenue comes from a single customer whose name is withheld from the filings, and there is no direct relationship with the final user. The operating margin fell from 19.0% in Q1 to 6.9% in Q2, and over the same period nickel purchase prices rose 14.5% while Ni-based selling prices rose 3.9%. The 'Tier 1 approval' is confirmed only by the company's announcement and press reports and does not appear in DART filings, and whether the qualification is kept depends on the customer's sourcing policy. On these numbers there is room to argue that the power to set prices sits with the customer rather than with the company, and that room changes the day the customer does.
Operating cash flow from 2023 through H1 2026 is a cumulative −KRW 26.9bn (−USD 19.2m). Over the same period the money raised was an IPO of KRW 44.2bn (USD 31.6m) and convertible bonds of KRW 132bn (USD 94.3m), and early redemption can be demanded from April 2028. The revenue ceiling of the existing plant is about KRW 238bn (USD 170.0m), and there is no filing for the start of construction of the third plant. If the money that funded growth was raised rather than earned, then unless cash generation turns by the time of repayment, more will have to be raised again."
What can be answered — superalloys take years to certify, and selling prices rising for three years is not the pattern of a simple subcontractor. Building its own furnaces, and the KAI titanium approval being a separate qualification unrelated to Customer B, also differ from that pattern. Much of the missing cash is inventory invested ahead of growth, and because trade receivables rose only KRW 1.5bn (USD 1.1m), collection itself is not the problem. The second convertible bond has no refixing clause, so large dilution at a low price is blocked.
What cannot be answered — (1) the cause of the Q2 margin drop cannot be explained from the filings alone. (2) Customer concentration of 66% is not softened by any reading. (3) The Tier 1 approval cannot be confirmed from a primary source.
13. What would invalidate the thesis
| Condition | Where to check |
|---|---|
| Cumulative operating cash flow through Q3 turning positive and Q3 gross margin of 20% or more (both together) | Q3 report (mid-November 2026) |
| In addition to the above, a contract filing with a second space customer other than Customer B, or a filing for the start of construction of the third plant plus company revenue guidance | DART supply contract and material event filings |
| (1) operating cash flow still negative in Q3 (2) gross margin below 18% (3) two consecutive quarters with no new contract — two of the three | Q3 report and supply contract filings |
| An emphasis of matter or modified audit opinion, recognition of a large inventory write-down, or a rights issue filing | Audit report and material event filings |
| Inventory rising further from above KRW 60bn (USD 42.9m), or inventory growing faster than revenue / amended filings extending existing contract terms / the order backlog falling and utilisation dropping at the same time | Quarterly reports and amended filings |
VIEW Section 6 noted that "the larger revenue becomes, the more cash is tied up". In the second half the Jun 19 contract of KRW 16.71bn (USD 11.9m) enters delivery and spending on the third plant may begin. In other words, operating cash flow turning positive in a half year of rising revenue is structurally difficult. Even if Q3 is negative, the size of the improvement (how much smaller than −KRW 5bn (−USD 3.6m)) should be read together with the gross margin.
14. Three closing questions
1. What has to happen for this to work? VIEW In order: (1) an improvement in operating cash flow in Q3 (a turn to positive would be conclusive; even a smaller deficit is meaningful — see the note in Section 13), (2) a return to a gross margin of 20% or more, and (3) a contract filing with a second space customer other than Customer B during 2027. With (3) the Bull case opens. If one of the five options in Section 9-4 appears as a contract, the optimistic scenario opens one notch further.
2. What makes it fail? VIEW The most likely path is "slow failure" — Customer B keeps ordering, but margin is shaved at the distribution stage and the operating margin stays around 10%, inventory keeps rising so cash does not circulate, and a rights issue follows at the 2028 repayment date. Rapid failure would be Customer B stopping its orders.
3. What evidence would change the view? → See the table in Section 13.
Sources
| Type | Document | Receipt number and date |
|---|---|---|
| Periodic | Annual report (December 2025) | 20260320001188 · Mar 20, 2026 |
| Periodic | Half-year report (June 2026) | 20260814004157 · Aug 14, 2026 |
| Current | Three single sales and supply contract filings | 20260102900287 / 20260619900580 / 20260625900304 |
| Current | New facility investment (amended) | 20260211900481 · Feb 11, 2026 |
| Current | Material event filing (convertible bond issuance) | 20260402002584 · Apr 2, 2026 |
| Current | Increase in short-term borrowings | 20260618900592 · Jun 18, 2026 |
| Current | Exercise of conversion rights | 20260811900863 · Aug 11, 2026 |
| Current | Stock option grant | 20260831001436 · Aug 31, 2026 |
| Current | Major shareholding report (Moon Seung-ho) | 20260901000211 · Sep 1, 2026 |
| Press | Reports of the Tier 1 approval | Etoday and Prime Economy, Mar 24, 2026 |
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