Silicon2: The Next Challenge in Growth Is Cash Collection
Analysis date
Published
MW GOBLIN · AI company research
As of 2026-10-01, growth prospects are positive. At KRW 38,600, the share price is about 12.6 times past earnings assuming conversion of the new shares, but an undervaluation judgment requires improved cash collection given inventory pressure and additional investment.
Toss Securities
Quote October 1, 2026 at 11:34 KST
Retrieved October 1, 2026 at 11:34 KST
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Expansion of overseas distribution network is translating into profit
Growth in the overseas wholesale network is translating into actual profits. In the first half of 2026, consolidated revenue was KRW 749.2 billion, up 46.6% year over year, while combined revenue from the EU and UK was KRW 318.1 billion, up 77.9%. The model, which provides customs clearance, inventory, and local distribution together, is a channel through which brands’ overseas sales are captured. The second-quarter operating margin was also 20.6%, higher than 19.7% in the same period a year earlier, so expansion in scale proceeded without weakening profitability. [1]
Inventory growth is constraining cash generation
Inventory expansion is constraining the conversion of earnings into cash. At the end of June 2026, consolidated inventory was KRW 451.0 billion, up 50.3% from the end of the previous year. Subtracting KRW 36.45 billion in purchases of tangible and intangible assets from first-half operating cash flow of KRW 13.5 billion leaves residual cash flow of -KRW 23.0 billion. At the same point, cash was KRW 82.3 billion, borrowings were KRW 68.2 billion, and lease liabilities were KRW 64.6 billion. If inventory is not sold down, dependence on external funding will increase as the company grows. [1]
Returns on raised funds must compensate for dilution
The KRW 300 billion fundraising increases capacity for expansion, but an increase in per-share value requires separate verification. Payment for 6.667 million redeemable convertible shares was completed on September 15, and conversion under the original terms would increase the number of common shares by 10.2%. A redemption request adding 2% annual compound interest is also possible starting in September 2029. The logistics facility acquisition decided on September 9 is KRW 55 billion, with the balance due on November 8. Improvements in logistics efficiency must compensate for the investment cost and dilution. [2][3][4]
Reference P/E of 12.6x assuming conversion
The KRW 38,600 share price is assessed against trailing 12-month net income attributable to owners of KRW 220.9 billion through June 2026. This is calculated by adding KRW 168.6 billion for 2025 and KRW 126.7 billion for the first half of this year, then subtracting KRW 74.4 billion for the first half of the previous year. Dividing by 72.12 million shares assuming conversion of the new shares (excluding treasury shares at the end of June and excluding options) gives converted EPS of KRW 3,063 and a P/E of 12.6x. This is a reference multiple including foreign-exchange gains and losses; it does not establish undervaluation before cash collection and return on investment are verified. [1][2][3]
What could change the thesis
- If EU and UK growth and profitability at the second-quarter level continue and inventory turnover improves, the assessment of earnings durability will rise.
- If cash deficits after investment continue due to increases in inventory and accounts receivable, or margins decline despite logistics investment, the per-share value assessment will fall.
Sources and Evidence
- Silicon2 2026 Semiannual Report ↗2026-08-14 · Consolidated financial statements; Notes 4, 26, 31 and 36
- Decision on Paid-In Capital Increase through Redeemable Convertible Shares ↗2026-08-18 · New shares, funding purpose, redemption and conversion terms
- Result of Issuance of Redeemable Convertible Shares ↗2026-09-15 · Section 3: actual issuance amount, shares and payment date
- Decision to Acquire Tangible Assets for Logistics Facility ↗2026-09-09 · Acquisition amount, purpose and payment schedule
This AI-generated report is for information. Check the analysis date and primary sources. Terms