Attention is focusing on whether the secondary battery corporations Kumyang(001570) can proceed as planned with an investment exceeding 1 trillion won despite worsening liquidity. While pushing ahead with large-scale investment, cash and cash equivalents under consolidation have fallen below 10 billion won. On top of that, after receiving a delisting decision from the Korea Exchange (KRX), some say that raising external funding will not be easy.
On the 23rd, according to the mid-sized corporations sector, Kumyang is expanding its secondary battery Gijang plant in Jangan-eup, Gijang-gun, Busan. The total expense for construction and production equipment investment is expected to be about 1.2 trillion won, including 610 billion won for plant construction and 547.5 billion won for equipment investment. So far, it has secured investment resources through borrowings from financial institutions and the largest shareholder, as well as treasury stock disposals. Of that, it is known to have raised more than 360 billion won through treasury stock sales.
◇ Kumyang, once picked as a "secondary battery" beneficiary stock… under liquidity pressure
Kumyang was founded in 1978 and produced blowing agents and precision chemical products before expanding into secondary batteries in the 2020s. It also established subsidiaries in China and the United States. In 2023, it held a groundbreaking ceremony for a secondary battery production plant in Gijang-gun, Busan, and on July 26, 2023, its intraday share price rose to 194,000 won, pushing its market capitalization to 10 trillion won. However, after receiving a "disclaimer of opinion" for two consecutive years, delisting was decided. Kumyang has filed for an injunction to suspend the effect.
Kumyang's largest shareholder is Chair Ryu Gwang-ji. Ryu, who worked at a securities firm, joined Kumyang in 1998 to handle financial management, acquired and rebuilt the company in crisis, and rose to become its largest shareholder. With 22.09% equity, Ryu exerts influence over overseas subsidiaries such as Kumyang Chemical Hong Kong, Kumyang Pakistan Light Industry, and Kumyang USA. The combined equity held by the largest shareholder and related parties, including relatives, affiliates, and executives, reaches 26.55%.
Once considered a secondary battery beneficiary stock, it now faces growing liquidity burdens as large-scale investment coincides with cash outflows. Under consolidation, Kumyang's cash and cash equivalents fell from 20 billion won at the end of 2024 to 9.2 billion won in March this year. Over the same period, interest-bearing financial liabilities inched up from 314.8 billion won to 317.8 billion won. The debt ratio stands at 173%. With cash on hand alone, it has become difficult to shoulder an investment plan exceeding 1 trillion won.
Moreover, it is not generating cash from operations. Under consolidation, cash flow from operating activities deteriorated from a net inflow of 14.9 billion won in 2023 to a net outflow of 43.2 billion won last year. In the first quarter of this year, 2.9 billion won also flowed out. In particular, although it executed 836.5 billion won in facility investment in 2023–2024, that plunged to 14 billion won last year and further shrank to 400 million won in the first quarter of this year. With cash generation weakening, the pace of new investment execution has also slowed.
Kumyang said, "We plan to raise future investment funds through a third-party allotment paid-in capital increase, bond issuance, and borrowings from financial institutions." It did not disclose details on orders and investment, the expected investment payback period, and other specifics, citing the characteristics of the secondary battery industry and the possibility of competitors inferring information.
◇ The 'delisting' risk… the key is whether there are realistic investment-attraction talks
Although it has presented several external funding plans, whether it can regain the trust of investors and financial institutions is seen as a variable going forward, given it is at risk of delisting. Kumyang had planned to raise 405 billion won through a paid-in capital increase, but postponed the payment date scheduled for June 30 to Sept. 30. The funding plan has not fallen through, but the timing of securing investment resources has been pushed back.
Last month, at a hearing on its application for an injunction to suspend the effect of the delisting decision against the Korea Exchange (KRX) at the Seoul Southern District Court, Kumyang argued, "Talks on attracting investment with multiple investors are making progress, and the accounting firm also verbally assured that it would issue an unqualified opinion if funding is secured." The Korea Exchange (KRX) countered, "The possibility of Kumyang receiving an unqualified opinion in the re-audit is very slim."
An industry official said, "Inflow of investment funds is needed to expect a re-audit and the resolution of uncertainty, but the structure is such that investors can commit funds only when the possibility of maintaining the listing and accounting reliability are confirmed," adding, "It will have to prove by the court's deadline for submitting materials that talks to attract investment have made progress."