SP Samhwa

All figures are consolidated K-IFRS, in KRW million unless stated. Fiscal years end 31 December. Revenue, operating profit, net income attributable to the parent, EPS and DPS for FY2022–FY2024 are the company-reported figures quoted in Chugoku Marine Paints' 28 November 2025 alliance disclosure. FY2021 and FY2025 figures, and balance-sheet and cash-flow lines, come from the annual business reports as compiled by financial data providers. FY2025 operating profit is the KRW 9,549 million in the 2026 Sustainability Report. EBITDA is operating profit plus depreciation and amortisation. Ratios are calculated from these figures.

Income statement

Revenue CAGR for FY2021–FY2025 was -0.6% a year. EPS is shown on the basic basis; the company has no material dilutive instruments outstanding other than the treasury-share-backed exchangeable bond, which does not create new shares.

Balance sheet

Total debt includes lease liabilities; net debt is total debt less cash and short-term investments.

Ratios

The company reported payout ratios of 56.2% for FY2024 and 124.1% for FY2025. The FY2023 figure is calculated from DPS and EPS. On a parent-only basis the FY2025 payout was 398.5%.

Interim 2026 results

Q1 2026 operating profit swung back to a profit from a loss in Q1 2025. Q2 2026 operating profit rose 69% year on year. Trailing-twelve-month revenue to March 2026 was KRW 628.1 billion and TTM operating income about KRW 14.9 billion.

Commentary on trends, inflections and drivers

Revenue. Group revenue peaked at KRW 646.0 billion in FY2022, helped by price increases passed through after the 2021 raw-material spike. It has since declined gently, by 2.3%, 0.5% and 1.8% a year. The cause is a prolonged slump in Korean construction starts, which hits architectural paint, the company's largest category. Lower exports to China also weighed: management attributed part of the weakness in Q1 2025 to reduced export volumes to China. Repainting demand, the largest part of the architectural business, has held up well. H1 2026 revenue growth of 3.6% was driven by overseas subsidiaries (fire-retardant coatings, large project wins, new product lines) and domestic specialty products.

Gross margin. Gross margin rose from 15.0% in FY2021 to 22.4% in FY2025. The drivers were easing raw-material costs (titanium dioxide, resins, solvents) after 2022, price discipline and mix. The FY2025 gross margin was the highest of the five years, even as operating profit fell. This shows that the FY2025 earnings decline came from higher SG&A and other operating costs, not from price.

Operating profit. Operating profit recovered from near zero in FY2021 (KRW 0.8 billion, a 0.13% margin, hit by input-cost inflation) to a peak of KRW 25.8 billion in FY2023. It then fell to KRW 19.0 billion in FY2024 and KRW 9.5 billion in FY2025. Q4 is seasonally weak: Q4 2024 showed an operating loss of KRW 0.9 billion on revenue of KRW 154.8 billion. The H1 2026 rebound to KRW 15.6 billion already exceeds the whole of FY2025. Management credits overseas restructuring and company-wide cost efficiencies, despite a weaker won raising imported raw-material costs.

Net income and EPS. Attributable net income moved from a KRW 2.4 billion loss in FY2021 to KRW 16.1 billion in FY2023, then fell to KRW 7.7 billion in FY2025 (EPS KRW 308). The share count used for EPS rose in FY2025 as treasury shares were sold to Chugoku. This dilutes per-share figures slightly but does not create new shares.

Balance sheet. Net debt has fallen every year, from KRW 141.8 billion in FY2021 to KRW 83.5 billion in FY2025. Gross debt is broadly stable at KRW 148–175 billion, while cash has more than doubled to KRW 70.1 billion. In FY2025 the company refinanced KRW 153.0 billion of debt. It termed out maturities: the current portion of long-term debt fell from KRW 39.4 billion to KRW 2.6 billion, and long-term debt rose to KRW 48.9 billion. The current ratio consequently improved from 1.19x to 1.50x. Short-term bank borrowings of about KRW 102 billion remain the main liquidity exposure. Inventory fell by about KRW 10 billion in FY2025 (KRW 102.4 billion to KRW 92.5 billion) as the company cut production and incoming raw materials in response to soft demand.

Cash flow. Operating cash flow was negative in FY2021 (KRW -27.0 billion) because of the inventory build during the raw-material spike. It recovered to KRW 43.6 billion in FY2023 and slipped to KRW 22.2 billion in FY2025. Capex has been modest, between KRW 6.8 billion and 18.5 billion, since FY2022, after a heavier KRW 34.1 billion in FY2021. FY2025 free cash flow of KRW 4.8 billion did not cover dividends paid of KRW 8.7 billion; the shortfall was funded from the cash balance and the proceeds of the treasury-share sale. The working-capital cycle is long and has crept up, at about 99 days in FY2025, reflecting dealer-channel receivables of 83–86 days.

Returns. ROE has not exceeded about 5% in five years, and the shares trade at about 0.5x book. The pattern is typical of the Korean paint sector, where capital-intensive plants and dealer working capital meet single-digit margins.

Guidance and expectations

Management gives no numeric earnings guidance. The quantified commitments are a 30% overseas revenue share under the ten-year plan, global-level profitability and GHG targets. There is no consensus forecast. H1 2026 operating profit of KRW 15.6 bn, against KRW 9.5 bn for all of FY2025, implies FY2026 operating profit well above FY2025 if the second half follows normal seasonality. Q4 is typically the weakest quarter.

Bull case

1. Earnings recovery is already visible. H1 2026 operating profit rose 240.8% and gross margin is at a five-year high (22.4% in FY2025). Specialty mix and cost efficiency could lift operating margin back toward the FY2023 peak of 4.1%.

2. Semiconductor materials offer real optionality. Mass supply of MMB to Samsung SDI and in-house EMC in flagship devices, with stated plans for HBM, DRAM and NAND packaging. At about USD 70,000/t for advanced-packaging EMC, modest volumes would be material to a company valued at about KRW 170 bn.

3. Asset value and yield support the shares. P/B is 0.48x, the dividend yield is 5.7%, net debt is falling (KRW 83.5 bn), and there is a friendly strategic holder (Chugoku, 9.19%) plus a governance-sensitive register that could attract value-up interest.

Bear case

1. The core is in structural decline. Revenue has fallen three years running with the construction slump, and price increases are politically constrained (KCC's 2025 increase was withdrawn).

2. Dividends exceed cash generation. FY2025 FCF was KRW 4.8 bn against KRW 8.7 bn of dividends; the payout ratio was 124.1%. Inheritance-tax instalments raise the risk that dividend policy serves the controlling family rather than earnings.

3. New businesses are small and concentrated. MMB and EMC depend on one customer relationship and compete against Sumitomo Bakelite, Resonac and Shin-Etsu. The IT and other segments have not contributed, and the Flyer and battery initiatives are pre-revenue.

Key catalysts and monitorables (next 12 months)

Q3 2026 quarterly report: Timing: By mid-November 2026; What to watch: Whether the H1 margin recovery holds; overseas subsidiaries' profit

FY2026 preliminary results and dividend decision: Timing: About early February 2027; What to watch: Full-year operating profit against FY2025's KRW 9.5 bn; DPS policy

EMC grade launched for H2 2026 mobile devices: Timing: H2 2026 – H1 2027; What to watch: Volume ramp; any new customers

MMB extension to memory/HBM packaging: Timing: 2027; What to watch: Qualification announcements with Samsung SDI or others

2027 AGM: Timing: March 2027; What to watch: Board composition under the amended Commercial Act; any Yoon family proposals; cumulative voting

Chugoku alliance deliverables: Timing: Ongoing; What to watch: Joint products, joint purchasing savings, overseas sales cooperation

Inheritance-tax instalments: Timing: Annual; What to watch: Any share sales or pledging by the largest shareholder

Korean construction and repaint demand: Timing: Ongoing; What to watch: Housing starts; apartment repainting cycle

Raw-material prices and KRW/USD: Timing: Ongoing; What to watch: Titanium dioxide, epoxy and acrylic resin costs; oil-linked solvents

Flyer and defence-material commercialisation: Timing: 2027; What to watch: First defence orders

Analyst verdict

SP Samhwa is a mid-cap Korean coatings maker in the middle of a pivot. Its 80-year franchise in architectural and industrial paint generates about KRW 620 billion of revenue but only low-single-digit margins. Its turnaround narrative depends on new materials that are real but still small. The evidence of operational improvement is credible. Gross margin widened by more than seven points between FY2021 and FY2025, and the first half of 2026 produced more operating profit than all of 2025, helped by fire-retardant coatings, UV-curable refinish and restructured overseas subsidiaries. Net debt has fallen by about 40% since FY2021, and FY2025 refinancing removed near-term maturity pressure.

The semiconductor story is the most important strategic development in the company's recent history. In about seven years it has moved from a KITECH technology transfer to mass production of MMB for Samsung SDI and of its own EMC. Its focus on warpage suppression and thermal conductivity addresses the main technical problems of advanced packaging. Investors should still keep it in proportion: there is one named customer, the incumbents are entrenched, and the revenue contribution is still too small for the company to disclose.

The overriding issue is governance and capital allocation. Third-generation CEO Kim Hyun-jung, a CPA and attorney, controls 27.39% with related parties, against about 20% for the co-founding Yoon family and 9.19% for the friendly Chugoku. Large inheritance-tax instalments, dividends of 124% of earnings, and the use of treasury shares for a friendly-party sale and an exchangeable bond all point to capital decisions shaped partly by the need to keep control. The amended Commercial Act increases the board's accountability to all shareholders.

At about 0.5x book and a 5.7% yield, the valuation already prices a low-return paint business. The upside depends on sustained margin recovery and visible scaling of electronic materials. The downside is protected by assets but exposed to dividend cuts and construction weakness. The stock is a special-situation holding: patient investors may be rewarded if FY2026 confirms the recovery and EMC volumes broaden beyond the first customer. The key tests over the next 12 months are the Q3 and FY2026 results and the 2027 AGM.