1. What is the CB Issuance?

Daejin Advanced Materials has decided to issue ₩9.3 billion in private convertible bonds to secure operating funds and improve its financial structure. The bonds have a 0% coupon rate and a 5.5% maturity rate, representing relatively low financing costs.

2. Why Issue CBs?

The company plans to utilize the raised funds for R&D investments, such as the development of electromagnetic shielding, flame-retardant, lightweight housing composite materials, and new dispersing agents for SWCNTs for cathode materials. This is interpreted as a strategy to secure future growth engines. By raising funds at a low interest cost, the company aims to minimize its financial burden while expanding investments for future growth.

3. How Will This Impact the Stock Price?

  • Short-term impact: Given the significant gap between the current stock price (₩536) and the conversion price (₩9,349), combined with the weak Q1 2025 earnings, the CB issuance is likely to negatively impact the stock price in the short term. Although the conversion possibility is low, the potential increase in the number of shares could weigh on investor sentiment.
  • Long-term impact: If the raised funds lead to effective investments and improved earnings, a positive impact on the stock price can be expected in the long term. However, this remains highly uncertain.

4. What Should Investors Do?

Investors should be wary of short-term stock price volatility. Closely monitor the company’s future earnings improvements, the specific investment destinations of the CB funds, and their performance. Pay particular attention to the resolution of the sales decline and increased inventory issues from Q1 2025. Without a substantial recovery in the company’s intrinsic value, the CB issuance is likely to burden the stock price, requiring cautious investment decisions.