Innospace IPO Valuation Analysis

• Our base case valuation of Innospace is target price of 51,481 won per share (12 month view), which is 28% higher than the midpoint of the IPO valuation range.

• We estimate Innospace to generate sales of 1.8 billion won in 2024, 28.7 billion won in 2025, and 58.3 billion won in 2026.

• Innospace is involved in the satellite launch vehicle production and launch service business.

Innospace is getting ready to complete its IPO in KOSDAQ in June 2024. The IPO price range is 34,600 won to 45,600 won. The book building for the institutional investors is from 23 to 29 May. The IPO offering amount ranges from 46 billion won to 60.6 billion won. According to the bankers' valuation, the implied market cap of the company post IPO is from 329 billion won to 434 billion won. Mirae Asset Securities is the lead underwriter of this IPO.

Major Shareholders - Kim Soo-Jong, the founder and CEO of Innospace, is the controlling shareholder of the company with a 24.56% stake. Kolon Group of companies including Kolon Glotech and Kolon 4th Industrial Revolution Investment Fund have a combined 13.97% stake in Innospace.

Potential Inclusion in KOSDAQ 150 - At the high end of the bankers' valuation, the company's implied market cap would be 434 billion won. Currently, there are 21 companies in KOSDAQ 150 index with lower market cap than 434 billion won. If we assume an optimistic scenario (30% upside from the high end of the market cap range), this would suggest a market cap of 564 billion won and there are 47 companies with lower market cap than this amount.

Company Background

Innospace engages in the satellite launch vehicle production and launch service business. By successfully conducting a suborbital flight test in March 2023, the company is among the companies in the world preparing to commercialize satellite launch services with hybrid rockets that have achieved performance above suborbital flight. There are approximately 49 companies worldwide that are currently at or above the engine development stage, and excluding Chinese companies.

Target market - The company's target market is the small satellite market, especially the launch vehicle and launch service market. A satellite launch vehicle is a means of transport for inserting a satellite into orbit, and is generally composed of multiple stages.

The lower stage (1st stage) provides thrust for escaping the atmosphere, and the upper stage (2nd stage, upper stage) provides thrust for escaping the atmosphere. It is responsible for injecting the satellite into orbit and accelerating it to settle in orbit.

Strong growth in Low Earth Orbit (LEO) expected globally - When analyzing the small satellite market by orbit, 99% of small satellite launch orbits are Low Earth Orbit (LEO) and Sun-Synchronous Orbit (SSO). The number of LEO orbiting satellites has increased significantly since 2020. The number of satellites launched into LEO is expected to increase by 444% over the next 10 years compared to the past 10 years, and the market size is expected to increase by 400% globally.

In the case of SSO, the quantity of launched satellites is expected to increase by 262% and the market size by 248% over the next 10 years compared to the past 10 years globally. Accordingly, the low-orbit small satellite market of 500kg or less, which the company is targeting, is expected to continue its rapid growth.

Global Launch Demand by Orbit (2012-2031) (Source: Euroconsult, Prospects for Small Satellites Market, 8th. Ed, 2022)

Strong Demand of Small Satellite Launches in Korea Expected - According to a report by the Korea Aerospace Research Institute (KARI), there is expected to be a strong satellite demand due to higher domestic launch vehicles in the future. According to KARI, the small satellite launch demand increased by 155% in 2020. Meanwhile, the domestic small satellite market size is expected to increase from about 50 billion won in 2022 to about 250 billion won by 2030, and the domestic small satellite launch market is expected to reach a market size of about 1.2 trillion won over 9 years.

Source: Company data