KCC Corp: Taking a Closer Step to Separating the Ownership Structures of the KCC Group

• There is an increasing probability that KCC Corp is closer to separating the ownership structures of the three Chung brothers regarding the various KCC Group related companies.

• KCC's 9.17% stake in Samsung C&T is worth 2.8 trillion won. KCC's stake in Samsung C&T is worth 117% of KCC's own market cap.

• According to our valuation analysis, it suggests NAV of 355,925 won per share, representing a 30% upside from current levels.

Conclusion First

There are three important factors impacting Kcc Corp (002380 KS).

• First is the increase in capital allocation to low PBR stocks in Korea with low valuations. KCC fits the bill for this first factor and it is trading at low PBR (0.4x). Kcc Corp (002380 KS)'s shares are up 20.1% YTD, sharply outperforming KOSPI which is up 0.5% in the same period.

• Second, there is an increasing probability that KCC Corp is closer to separating the ownership structures of the three sons regarding the various KCC Group related companies. Mong-Ik Chung (second son) recently reduced his stake in KCC Corp from 5.85% to 4.65%. This is an evidence of such change.

• Third, there is an increasing probability of KCC Corp siding with activist investors to push the value of Samsung C&T higher.

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Major Shareholders of KCC Corp

Mong-Jin Chung is the largest single shareholder of KCC with a 19.6% stake, followed by treasury (17.2%), Mong-Yeol Chung (6.3%), and Mong-Ik Chung (4.65%) Mong-Ik Chung recently reduced his stake in KCC Corp from 5.85% to 4.65%. Mong-Jin Chung is the first son. Mong-Ik Chung is the second son, and Mong-Yeol Chung is the third son.

• Mong-Jin Chung (first son, born in 1960, Chairman of KCC Corp) - 19.6%

• Mong-Ik Chung (second son) - 4.65%

• Mong-Yeol Chung (third son) - 6.3%

Foreigners owned 13.2% stake in KCC Corp as of 13 March 2024, up from 12.3% at end of 2023. The increasing foreign ownership contributed to higher prices this year.

Market Caps of Major KCC Group Companies:

• Kcc Corp (002380 KS) - 2,439 billion won

• KCC Glass (344820 KS) - 647 billion won

• Kcc Engineering & Constructi (021320 KS) - 100 billion won

Major Shareholders of KCC Glass

• Mong-Jin Chung (first son) - 8.56%

• Mong-Ik Chung (second son) - 26.06%

• Mong-Yeol Chung (third son) - 2.76%

Foreigners owned 10.0% stake in KCC Glass as of 13 March 2024, up from 9.6% at end of 2023. Share price of KCC Glass is down 1.2% YTD.

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Increasing Probability of Separating the Ownership Structures of KCC Group Companies Among Three Chung Sons

There is an increasing probability that KCC Corp is closer to separating the ownership structures of the three Chung brothers regarding the various KCC Group related companies. Mong-Ik Chung (second son) recently reduced his stake in KCC Corp from 5.85% to 4.65%. This is an evidence of such change.

The three Chung sons (Mong-Jin Chung, Mong-Ik Chung, and Mong-Yeol Chung) all have important roles in major KCC Group companies including KCC Corp, KCC Glass (344820 KS), and Kcc Engineering & Constructi (021320 KS). However, the ownership structures are still intertwined and the complete separation of their ownership structures has not yet been achieved.

Under the current Fair Trade Act, the owner family must reduce the proportion of stock holdings of related parties to less than 3% (based on listed companies) in order to separate affiliates. This means that in order to separate the affiliates, the second and third brothers must lower their stake in KCC Corp and KCC Glass, respectively.