1. What Happened at NGS Technology?
NGS Technology reported revenue of KRW 42.8 billion, operating profit of KRW 3.38 billion, and net income of KRW 1.92 billion in H1 2025, marking a return to profitability. This was primarily driven by strong performance in its automotive parts business and the consolidation of its subsidiary, DMC.
2. Behind the Turnaround: A Deeper Dive
The company’s return to profitability can be attributed to the robust automotive parts business and the acquisition of DMC. However, the acquisition, along with capital increases and convertible bond issuances, has significantly increased the debt-to-equity ratio to 91.51%. This raises concerns about short-term financial stability.
3. Key Investment Analysis
The positive aspects include the successful turnaround and continued growth in the core automotive parts business. The expansion into the HIM (Heavy Industry Machinery) segment also presents a promising opportunity. However, the high debt-to-equity ratio and vulnerability to external factors pose significant risks. Changes in interest rates or exchange rates could exacerbate financial burdens.
4. Should You Invest in NGS Technology?
- Cautious Approach: While the return to profit is a positive sign, the high debt level represents a significant risk. Consider a dollar-cost averaging strategy and closely monitor changes in financial indicators.
- Monitor Financials: Pay close attention to the trend of the debt-to-equity ratio and interest expense management.
- Analyze Diversification Strategy: Evaluate the performance of new business ventures, such as the HIM segment.
- Assess Macroeconomic Impact: Analyze the potential impact of changes in interest rates, exchange rates, and oil prices.