[Edaily Reporter Shin Ha-yeon ] Controversy continues to surround the enterprise value of #Duksan Nepcore, a company specializing in ultra-precision navigation and anti-jamming technology that is pursuing a KOSDAQ listing. This is due to the selection of major defense contractors such as HANWHA AEROSPACE(012450)and #LIG D&A as comparable companies, as well as a price-to-earnings ratio (PER) of around 50 times, calculated based on projected net income for 2026.

However, a closer look at the actual structure used to determine the public offering price reveals that the company’s value was calculated by discounting projected 2028 earnings to present value, based on the defense industry’s characteristic long-term supply structure and future performance. Analysts suggest this approach could largely dispel concerns about overvaluation stemming from simple comparisons of market capitalization and PER.

According to the Financial Supervisory Service’s Electronic Disclosure System (DART) on the 10th, Deoksan Nepcores proposed a target price range of 12,400 to 14,600 won for its initial public offering (IPO). This method involves converting the estimated 2028 net income to present value and then applying the average P/E ratio of 34.08 times for FIRSTEC, HANWHA AEROSPACE, and LIG D&A. In IPOs, corporate value is typically calculated using relative valuation metrics from listed companies with similar business and revenue structures, and the target price is then set after applying an IPO discount.

The inclusion of major systems integrators as comparable companies stems from the nature of the defense industry. For Duksan Nepcore’s satellite navigation and anti-jamming devices, once a supplier is selected during the weapons system development process, a long-term supply relationship continues through mass production, performance upgrades, and maintenance; furthermore, high technical and security requirements make it difficult for new entrants to enter the market.

Consequently, an increase in orders for system integrators can lead to higher order volumes for key subsystem suppliers. This implies that, despite differences in company size, the growth trajectories of HANWHA AEROSPACE and LIG D&A—driven by their expanding exports—could align with that of Deoksan Nepcore. The limited pool of potential comparable companies—with only about 31 designated domestic listed defense firms—was also taken into account.

It is also worth noting that projected 2028 earnings were used to calculate the company’s enterprise value. While a simple application of the projected 2026 net income would result in a P/E ratio of 48–57 times, the actual valuation is based on 2028 earnings. The P/E ratio—calculated by dividing market capitalization by net income—varies significantly depending on which year’s earnings are used.

Duksan Nepcores used the projected net income for 2028—when the expansion of its navigation and anti-jamming businesses and entry into overseas markets are expected to gain full momentum—as the basis for its valuation. The company estimated net income under a conservative scenario, focused on contract-securing businesses, at approximately 13.3 billion won, and under a neutral scenario, which also factored in overseas export-linked businesses, at approximately 19.0 billion won; it applied the average of these two figures—16.16 billion won—to the valuation. This effectively reflects, to a certain extent, the uncertainties associated with the pace of overseas business development and delivery volumes.

In the process of discounting future profits to present value, a discount rate of 15% per annum was applied. This figure is lower than the weighted average cost of capital (WACC) of 20.84% for comparable companies and the typical discount rate of around 20% for technology growth companies. This could lead to criticism that the company’s value was inflated by applying a low discount rate.

In response, the securities registration statement cites the fact that, unlike typical companies eligible for the technology exemption, the company is already generating earnings. It explains that the company is recording annual revenue of approximately 48.5 billion won and a net profit, and that future revenue and earnings can be estimated based on past mass production performance and the order backlog, resulting in a relatively low risk of failure to meet earnings targets.

Industry observers suggest that Deoksan Nepcores’ valuation should not be judged solely by its market size or its 2026 P/E ratio, but rather by considering the defense industry value chain and the visibility of its 2028 performance. Of course, whether the projected 2028 performance will actually be achieved and whether a discount rate of 15%—which is 5.84 percentage points lower than the average WACC of comparable companies—is appropriate are separate issues.

An investment banking industry official explained, “A conservative scenario was applied in the process of calculating the estimated net income for 2028, so business uncertainties have already been factored in, and the company is generating earnings through actual mass production and delivery, not just research and development.” The official added, “It appears that a 15% present value discount rate was applied after comprehensively considering the fact that the company has lower business volatility and commercialization risks compared to system integrators.”