이 기사는 2020년 03월 04일 08:00 thebell 에 표출된 기사입니다.

The PE unit of South Korea’s NH Investment & Securities (NH PE) plans to invest 50 billion won in Hwaseung Enterprise – an original design manufacturer (ODM) of shoes including global brand Adidas – betting on the growth potential of the footwear market in emerging countries.

NH PE and two other firms, Shinhan BNP Paribas Asset Management and KB Securities, are set to invest a combined 150 billion won in Hwaseung Enterprise, sources with knowledge of the matter said on February 26. They plan to establish a special purpose company to purchase convertible notes issued by the shoe manufacturer.

NH PE plans to use its 220 billion won fund, NH New Growth PEF, to finance the purchase. The fund mainly invests in mid-sized growth companies. Its limited partners include affiliates of NH NongHyup Financial Group, Korea Development Bank (KDB) and the Industrial Accident Compensation Insurance and Prevention Fund under the Ministry of Employment and Labor.

Hwaseung Enterprise is the fund’s second investment, following a 40 billion won acquisition of two digital marketing agencies – Makeulike and Granmonster – last year. It is a holding company established in 2015 to list its overseas subsidiary factories on the South Korean stock market.

The company’s rapid growth is one of the key reasons for the PE firm’s decision on the investment: Its revenue grew at a double digit rate from 640 billion won for 2016 to 879 billion won for 2018. EBITDA, a metric commonly used to evaluate a company's ability to generate cash, also increased from 62.1 billion won to 77.6 billion won over the same period.

The rapid growth in the company’s sales in the past few years is attributable to vertical integration and rival vendors exiting the industry. The share of high-value-added products in its product mix has continued to grow, with more Adidas footwear models produced by Hwaseung Enterprise after the footwear brand’s third largest vendor recently stopped production.

NH PE also focused on the company’s progress in automation of manufacturing processes. Hwaseung Enterprise aims to increase the level of automation at its factory in Vietnam to 70 percent by the end of the year.

Increasing market share of Adidas in China and Southeast Asian countries, with growing demand for high-end models like the Boost, also indicates the likelihood of faster growth in sales.

“We visited overseas factories owned by Hwaseung Enterprise in February to conduct due diligence,” a representative for NH PE said. “Through the due diligence process, we was once again convinced of the company’s growth potential.”

(By reporter Choi Ik-hwan)