An Update on Daewon Sanup (Corporate Activism by VIP Asset Mgmt)
In this insight, I provide an update on Daewon Sanup (005710 KS), which is a leading auto parts maker in Korea.
Daewon Sanup has very high levels of net cash (148% net cash as % of market cap), steady growth in sales, stable profit margins, and attractive valuations.
VIP Asset Management has been putting increasing pressures on Daewon Industrial to improve its corporate governance in recent months.
I first published on this company back in November 2025: Korea Small Cap Gem #48: Daewon Sanup.
Very High Levels of Net Cash - At the end of 2025, the company had net cash of 411 billion won. Given its current market cap of 277 billion won, its net cash as percentage of market cap is 148% which remains one of the highest among all Korean companies.
Attractive Valuations - Based on the company’s net profit of 77 billion won in 2025, this represents a P/E of 3.6x. In addition, based on its equity of 585 billion won at the end of 2025, this represents P/B of 0.5x. These are cheap, attractive valuations.
Core Supplier to Kia Corp and Hyundai Motors - Daewon Sanup has been providing automobile seats to Kia Corp (000270 KS) and Hyundai Motor (005380 KS) for several decades. Daewon Sanup is one of the long, trusted suppliers to these auto giants in Korea and has secured a loyal customer base.
Corporate Activism by VIP Asset Management
VIP Asset Management has been putting increasing pressures on Daewon Industrial to improve its corporate governance in recent months. VIP Asset Management is a local fund management company with AUM of nearly 10 trillion won ($7 billion). VIP Asset Management typically does not get actively involved in corporate governance of Korean companies.
However, it does get involved in occasionally cases (like Daewon Industrial). VIP Asset Management had a 2.99% stake in Daewon Industrial at the end of 2025. Minority shareholders owned a 26.5% stake in Daewon Industrial at the end of 2025.
Daewon Industrial is a text-book example of a Korean company with solid financials with attractive valuations but is offset with poor corporate governance. So a key issue is if the company is able to improve its corporate governance, its valuation multiples are likely to increase significantly. Its share price is up 73% in the past one year, but has underperformed the market.
What is the Key Corporate Governance Issue? A key issue facing Daewon Industrial is the negative perception that the company may be “intentionally keeping its share price low” in order to pay lower inheritance taxes. This concern is faced by not only Daewon Industrial but many other companies in Korea.
Two Key Members of Daewon Industrial - The two key members of Daewon Industrial is Huh Jae-gun (Chairman) and Heo Seon-ho (son of Chairman, born in 1984, 42 years old). Huh Jae-gun (Chairman, born in 1950, 76 years old) has a 16.54% stake in Daewon Industrial which has already begun preparations for succession. Heo Seon-ho was promoted from Executive Director to Vice President in 2024. Heo Seon-ho owns a 3.58% stake in Daewon Industrial and it is likely that he will receive additional stakes in the company from his father through gifts and inheritance in the next several years.
Daewon Industrial Could Take Two Main Paths - Daewon Industrial could intentionally keep the share price low which could reduce the overall inheritance taxes for the son Heo Seon-ho when he finally takes over the company. However, there is another way which is to improve the company’s corporate governance significantly that would raise the value of the company several fold. The increase in the market cap and value of the company would then more than offset the higher inheritance taxes the son may pay.
For the very best companies in Korea such as Samsung Electronics, this kind of decision has already been decided long time ago. Samsung will abide by the excellent corporate governance policies and try to raise the shareholder value as much as possible, rather than seek to reduce inheritance taxes by intentionally keeping the share price low.
Nonetheless, for smaller companies such as Daewon Industrial, it has yet to realize the significant benefits that could accrue to the company and its shareholders by improving their corporate governance.
