DEEP RESEARCH · KCC
[KCC] Value-Up Plan and an EB Backed by HD Hyundai Heavy Industries Shares — A Transition Toward an Advanced-Materials Company
2030 vision, Momentive consolidation, an KRW 850B EB backed by HD KSOE shares, a new dividend policy, and an SOTP valuation
0. Bottom line first
KCC's value-up plan is more than a passive response to market demands — it is a strategic turning point aimed at closing a chronic valuation gap. The three pillars of success are: (1) integration and earnings recovery of the global silicone subsidiary Momentive, capturing the EV and advanced electronic materials markets, (2) clever monetization of undervalued strategic stakes — like the KRW 850B EB backed by HD KSOE shares, and (3) consistent execution of a transparent, predictable dividend policy defined as KRW 6,000 / share plus 10% of standalone operating income above KRW 100B. An SOTP intrinsic value of about KRW 559,700 / share versus the current KRW 309,500 implies roughly 80.8% upside. Key risks are a prolonged construction downturn, Momentive integration execution, and volatility of the listed-equity stakes.
1. The 2030 vision — quantitative targets
KRW 10T (consol.)
Target by 2030.
OPM 10%
Consolidated operating margin of 10%+.
Interest coverage 2.0x↑
Reducing the Momentive-driven debt burden is the key.
PBR 1.0x↑
Up from a current 0.3–0.4x range.
86%+ compliance
Key-indicator compliance rate (2023 66.7% → 86%+).
Official fact: The structure mirrors KRX's "Corporate Value-Up Program" guidelines — Value-up Guidelines (Draft, FSC), KCC governance report (KIND).
Interpretation: Listing measurable financial and non-financial targets reads as a signal that KCC is moving away from the opaque, owner-centric governance behind the "Korea discount" and toward shareholder-centric, professional management. — See Thornburg: Why Is There a Korea Discount?, Berkeley Economic Review: The Korean Discount.
2. Acquiring Momentive — in two steps
Official fact: In 2019, a consortium (KCC, SJL Partners, Wonik QnC) acquired Momentive for about US$3.0B (~KRW 3.5T), with KCC holding 45.5% — Yonhap on the deal. After the planned NYSE listing fell through in April 2024, KCC raised ~KRW 400B more in debt and effectively spent ~KRW 405B to buy the rest, taking Momentive to a 100% subsidiary — Asia Business: failure of Momentive IPO, KRW 400B funding for FI stake purchase.
2-1. Strategic synergies
Front + back-end
KCC's EMC localization track record + Momentive's high-purity quartz / ceramics / silicone gels / adhesives / coatings.
Thermal, insulation, gap fillers
Battery thermal management, insulation and gap fillers for power electronics, adhesives, potting. Brands: SilCool™ / SnapSil™ / NEVSil™.
Silicone-epoxy hybrid
In-house development possible for hybrid resin coatings — Elkay: Beyond Epoxy.
3. Listed-equity stakes — from white knight to ammunition
Official fact (end of 2023): KCC owned 9.17% of Samsung C&T (17,009,518 shares) and 3.91% of HD KSOE (2,763,962 shares). As of August 2024, the listed-equity portfolio was worth more than KRW 4.5T, while KCC's market cap was only about KRW 2.6T — a classic "conglomerate discount" where the operating business was barely valued. — Hankyung: White-knight KCC's holdings worth KRW 4.5T vs KRW 2.6T market cap, HD KSOE block-holding report (KIND).
3-1. KRW 850B EB backed by HD KSOE shares
Official fact: KCC decided to issue a KRW 850B exchangeable bond (EB) backed by its HD KSOE shares. Typical structure: 5-year maturity, 0% coupon, exchange price set at a premium to the current share price — Yonhap on HD KSOE's KRW 600B EB, Yonhap Infomax, KB Think: ICS / NH Sec underwriters.
Cheap funding
0% coupon eases Momentive-related debt service.
Keeps upside
If the exchange price isn't reached, KCC keeps the shares and any shipbuilding super-cycle gains.
Tax deferral
Monetizes without triggering immediate capital-gains tax.
Capital allocation
Proceeds go to repaying Momentive debt and to core-business investment.
Interpretation: The point is converting a passive non-operating asset into "ammunition" for the core business — a direct answer to criticism of capital-allocation inefficiency. — On EB mechanics: KLCA EB Issuance Handbook.
4. Balance-sheet health — debt & cash flow
4-1. Consolidated cash-flow statement (KRW B)
| Item | 2021 | 2022 | 2023 |
|---|---|---|---|
| Operating cash flow (CFO) | 649.3 | 384.6 | 788.3 |
| Net income | -53.2 | 28.7 | 92.5 |
| D&A and other non-cash | 496.8 | 511.9 | 509.8 |
| Working-capital change etc. | 205.7 | -155.9 | 186.0 |
| Investing cash flow (CFI) | -259.3 | -393.0 | -379.0 |
| Capex (tangible) | -244.9 | -315.6 | -264.7 |
| Intangible additions | -10.4 | -28.9 | -20.2 |
| Financing cash flow (CFF) | -163.4 | -184.0 | -279.1 |
| Net debt change | -143.2 | 163.1 | -154.9 |
| Dividends paid | -44.4 | -62.8 | -80.1 |
| Net change in cash | 226.6 | -192.5 | 130.1 |
Official fact: At end-2023 total debt was KRW 7.9T with a debt-to-equity ratio of 145.13% (vs 136.32% in 2022) — reflecting the Momentive investment. — KCC financials (CompanyGuide).
5. New dividend policy — two-tier
Official fact: The new policy is (1) a floor of KRW 6,000 / share, plus (2) 10% of standalone operating income above KRW 100B as additional dividend funding. Historically dividends were KRW 6,000 (2021), KRW 7,000 (2022), KRW 7,000 (2023) — discretionary. Anchoring on standalone operating income raises both predictability and transparency.
5-1. Simulation (assumes ~7.35M shares outstanding ex treasury)
| Item | 2021 | 2022 | 2023 |
|---|---|---|---|
| Standalone OP (KRW B) | 299.9 | 177.8 | 345.3 |
| Base DPS (KRW) | 6,000 | 6,000 | 6,000 |
| Variable pool (KRW B) | 19.99 | 7.78 | 24.53 |
| Variable DPS (est., KRW) | ~2,718 | ~1,058 | ~3,335 |
| Simulated total DPS (KRW) | ~8,718 | ~7,058 | ~9,335 |
| Actual paid DPS (KRW) | 6,000 | 7,000 | 7,000 |
| Simulated yield | 3.12% | 2.53% | 3.34% |
Interpretation: On 2024 estimates this works out to roughly a 4.25% dividend yield. The floor-plus-variable structure provides stability in weak years and lifts payout automatically in strong ones.
6. SOTP valuation
6-1. Operating value
| Segment | 2024E EBITDA (KRW B) | EV/EBITDA | Value (KRW B) | Note |
|---|---|---|---|---|
| Silicones (Momentive) | 550 | 9.0x | 4,950 | Global chemical peer average |
| Coatings | 250 | 8.0x | 2,000 | Global coatings peer average |
| Building materials | 200 | 6.0x | 1,200 | Korean building-materials peer average |
| Total operating value | 8,150 |
6-2. Non-operating asset value (close, 2025-07-03)
| Stake | Shares | Price (KRW) | Value (KRW B) |
|---|---|---|---|
| Samsung C&T | 17,009,518 | 162,600 | 2,766 |
| HD KSOE | 2,763,962 | 330,500 | 913 |
| Total non-op value | 3,679 |
6-3. Intrinsic value
- Total EV = Operating + Non-op = KRW 11,829B
- (-) Net debt (end-2023) = KRW 6,856B
- Implied equity value = KRW 4,973B
- Per-share intrinsic value ≈ KRW 559,700
- Current share price (2025-07-03) = KRW 309,500
- Implied upside ≈ 80.8%
Official fact: Price sources — Samsung C&T (Toss Sec), HD KSOE (Toss Sec), KCC snapshot: CompanyGuide. Multiple references: NYU Stern (Damodaran) Sector EV/EBITDA, Equidam Industry EBITDA Multiples 2025.
7. Risks
- Macro: a prolonged construction downturn weighs on building materials / coatings. — KDI 2030 Construction Outlook.
- Execution: any failure to integrate or turn around Momentive worsens debt service. Low-cost Chinese silicone is another threat. — The Guru: Momentive divests sealants business.
- Market volatility: the value of the listed-equity stakes drives EB / monetization terms and timing. — EB report.
8. Conclusion & suggestion
This is a blueprint for an identity transition, not a formal announcement. Reaching PBR 1.0x requires (1) silicones staying profitable, (2) continued asset rationalization (the EB is just the start — Samsung C&T stake monetization may follow), and (3) consistent execution of the new dividend policy. Monitor quarterly silicone revenue / OPM, leverage / interest coverage trends, dividend follow-through, and further strategic moves like more EBs or stake sales.
Sources
- Original Naver Blog post: https://m.blog.naver.com/PostView.naver?blogId=star_of_self&logNo=223920798851
- Value-up Guidelines (Draft, FSC): https://www.fsc.go.kr/comm/getFile?srvcId=BBSTY1&upperNo=82214&fileTy=ATTACH&fileNo=14
- KCC governance report (KIND): https://kind.krx.co.kr/common/disclsviewer.do?method=search&acptno=20240531001085
- Yonhap: KCC acquires Momentive for KRW 3.5T: https://www.yna.co.kr/view/AKR20190516044900003
- Asia Business: Momentive IPO miss, KRW 400B funding: https://www.asiae.co.kr/article/2024042918125772247
- InvestChosun: KCC-SJL fund controversy: https://www.investchosun.com/site/data/html_dir/2018/09/03/2018090386005.html
- Hankyung: Momentive funding (MarketInsight): https://www.hankyung.com/article/2018100429641
- Hankyung: KCC white-knight, KRW 4.5T holdings vs KRW 2.6T mcap: https://www.hankyung.com/article/2024082169171
- HD KSOE block-holding report (KIND): https://kind.krx.co.kr/common/disclsviewer.do?method=searchInitInfo&acptNo=20220224001161
- Yonhap Infomax: HD KSOE KRW 600B EB: https://news.einfomax.co.kr/news/articleView.html?idxno=4344626
- Yonhap: HD KSOE KRW 600B EB: https://www.yna.co.kr/view/AKR20250225159400003
- KB Think: HD KSOE EB ICS / NH Sec underwriters: https://kbthink.com/news-list/view.html?newsId=20250225184610831
- InvestChosun: HD KSOE 2nd EB under consideration: https://www.investchosun.com/site/data/html_dir/2025/06/25/2025062580176.html
- KLCA EB Issuance Handbook: http://www.klca.or.kr/KLCADownload/eBook/P5996.pdf?Mode=PC
- Thornburg: Why Is There a Korea Discount?: https://www.thornburg.com/article/why-is-there-a-korea-discount/
- Berkeley Economic Review: The Korean Discount: https://econreview.studentorg.berkeley.edu/the-korean-discount/
- Dow: Fascinating Silicones: https://www.dow.com/en-us/fascinating-silicones.html
- Wacker E-Mobility: https://www.wacker.com/cms/en-us/products/applications/automotive-aerospace-railway/e-mobility/e-mobility.html
- Momentive NEVSil™: http://go.momentive.com/nevsil
- Elkay: Beyond Epoxy (silicone hybrid resin): https://elkaysilicones.com/beyond-epoxy-advanced-heat-resistant-coatings-with-silicone-hybrid-resin-technologies/
- NYU Stern (Damodaran) Sector EV/EBITDA: https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/vebitda.html
- Equidam Industry EBITDA Multiples 2025: https://www.equidam.com/ebitda-multiples-trbc-industries/
- KCC financials (CompanyGuide): https://comp.fnguide.com/SVO2/asp/SVD_Finance.asp?pGB=5&gicode=A002380
- KCC(A002380) Snapshot (CompanyGuide): https://comp.fnguide.com/SVO2/ASP/SVD_Main.asp?pGB=1&gicode=A002380
- Samsung C&T (Toss Sec): https://tossinvest.com/stocks/A028260/order
- HD KSOE (Toss Sec): https://tossinvest.com/stocks/A009540/order
- KDI 2030 Construction Outlook: https://eiec.kdi.re.kr/policy/domesticView.do?ac=0000128899
- The Guru: Momentive divests sealants business: https://www.theguru.co.kr/news/article.html?no=15831
- [Value-up] KCC 2030 revenue KRW 10T, ROE 10%: https://www.4th.kr/news/articleView.html?idxno=2089712
- KCC record earnings, Hana Securities target KRW 350,000: https://www.newspim.com/news/view/20250210000063