Deokyang Energen, which launched its first initial public offering (IPO) this year, has moved to acquire DKME three months later, accelerating its business expansion. After securing a stable demand base through S-Oil's "Shaheen Project," it is expanding its scope to the EPC (engineering, procurement, construction) business targeting replacement demand for aging hydrogen plants.
According to the Financial Supervisory Service's electronic disclosure system on the 24th, Deokyang Energen signed a contract to acquire 3.65 million DKME shares (13.65%) for 22.4 billion won. The funds to be invested amount to 53% of its equity capital (42.5 billion won). At the same time, it will participate in DKME's rights offering to acquire 1.5 million new shares (5.62%) for 7.5 billion won. The acquisition funds are 17.6% of its equity capital.
The acquisition funds will come from equity capital. As of the end of 2025, Deokyang Energen's total equity is 42.5 billion won. In particular, it is known to be using 31.3 billion won of retained earnings. While the company's annual net income is in the 4 billion won range, its annual cash generation from operating activities, reflecting depreciation, is around 7 billion to 8 billion won.
The reason such an aggressive M&A, deploying 70% of equity, was possible is cited as the IPO conducted early this year. If about 30 billion won is invested in the acquisition, total equity would fall to 12.5 billion won and the liability ratio would exceed 400%, but if the 75 billion won in IPO proceeds is reflected this year, the liability ratio could drop to around 70%.
Behind Deokyang Energen's acquisition of DKME lies a strategy to advance its EPC business. As the replacement cycle for aging hydrogen plants at domestic chemical companies coincides and market expansion is anticipated, the company aims to secure technological competitiveness by acquiring DKME, which has the capability to manufacture customized heat exchangers for petrochemical and energy plants.
Deokyang Energen is originally a company that produces and supplies hydrogen. It refines byproduct hydrogen generated in petrochemical processes into high-purity hydrogen and supplies it to refiners and chemical companies. About 80% of sales come from pipeline supply, followed by tube trailers (11.8%) and EPC (7.6%).
However, the market still sees the "Shaheen Project" as the core of performance. Chul Yoon, an analyst at Korea Investment & Securities Co., said, "What ultimately matters for Deokyang Energen's performance visibility is the progress of the Shaheen Project," adding, "Performance momentum is expected to strengthen around July when the plant enters trial operation."
Previously, Deokyang Energen formed a 50-50 joint venture (JV), KND Energen, with Kukdong Oil & Chemicals and won the "Shaheen Project," worth 9.2 trillion won, to supply hydrogen to S-Oil for 15 years on an exclusive basis. The Shaheen Project directly converts crude oil into petrochemical feedstock through thermal cracking without refining it into fuel oil, and the process requires large volumes of hydrogen.
The IPO early this year was also part of raising funds needed for the project. In January this year, Deokyang Energen issued 750,000 shares through the IPO to raise a total of 75 billion won. Of this, 38.5 billion won is planned for building shipping centers in Ulsan and Daesan, and 28 billion won will be used to acquire KND Energen securities.
Industry observers say Deokyang Energen's aggressive expansion could increase its market dominance going forward. An industry official said, "The hydrogen industry is currently an oligopoly," adding, "If the Shaheen Project takes root successfully, Deokyang Energen's influence will expand further." The current hydrogen market for refining and petrochemicals is an oligopoly formed by Aprotium, Deokyang Energen, and SPG Hydrogen, among others.