[Company analysis] HLB Co., Ltd. (에이치엘비)

「HLB Co., Ltd. (에이치 엘비)」is the only lifeboat manufacturer in South Korea and a biotechnology company that owns many bio subsidiaries. It has the second largest share in the world lifeboat market, with over 50% of the domestic market share in South Korea. 「Hyundai Heavy Industries(현대 중공업)」,「Hyundai Mipo Dockyard(현대 미포 조선)」and「Samsung Heavy Industries(삼성 중공업)」and「Daewoo Shipbuilding & Marine Engineering(대우 조선 해양)」are the major customer of this company. In the biotechnology business, they are focusing not only on medical devices such as syringes, but also on the development of new anticancer drugs. The number of connected employees is about 72.

 

1. Company Profile

2. Summary and Features

3. Major Business

4. Financial Information

 

 

 

1. Company Profile

 

※Unit is KRW 10 million, as of 2019

Company name	HLB Co., Ltd.
Company name (Korean)	에이치엘비
Date of establishment	Friday, October 18, 1985
Headquarters location	울산광역시 울주군 온산읍 당월로 216-53
Capital	1,794
Consolidated sales	3,842
Consolidated operating profit	(4,873)
Consolidated total assets	36,261
Consolidated capital	18,924
Capital adequacy ratio	52.2%
Consolidated number of employees	72

 

 

 

2. Summary and Features

 
Founded in 1985,「HLB Co., Ltd. (에이치 엘비)」was a professional manufacturer of valves and industrial machinery for plants. However, during the recession caused by the East Asian economic crisis in 1997, the number of new orders drastically decreased and eventually they faced a management crisis. From that event, they started business diversification and added the electric instrumentation business, composite materials business, and biotechnology business to their business portfolio. In particular, since 2015, this company acquired many bio-subsidiaries, so they are recognized as a biocompany by investors. 

However, the largest business of「HLB」 is the manufacture of lifeboats. In 2007, they started this business by making「Hyundai Lifeboat(현대 라 라이프 보트)」, which was separated from「Hyundai Precision Industry(현대 정공)」, a subsidiary. Currently, this company has developed small engine in-house and many lifeboat models. The  annual production capacity is around 700 units. This lifeboat business basically requires enormous initial investment costs and high level of stability in its quality. In addition, the shipowner companies tend not to change the existing supplier easily, so the entry barrier of lifeboat industry is very high.

 

As described above,「HLB」is the only lifeboat manufacturer in Korea, mainly competing with Chinese companies, and has a domestic market share of over 50% and it has 2nd higest market share in the world. However, because this  business is greatly affected by external economic factors such as raw material prices, exchange rates, and crude oil prices, and most of all, the shipbuilding volume of customers, so there is a huge risk. In addition, many European and Chinese companies are trying to conduct low price strategies, so the price competition has become more intense by years.

In 2015, this company started full-scale entry into the biotechnology business. Since then, 「HLB」has a differentiated pipeline of stem cell therapeutics and surgical hemostasis. In 2018, they acquired「Hwajin Medical(화진 메디칼)」, which specializes in the production of disposable syringes, disposable needles, filter syringes, and other medical devices. By this merger, this company acheive a 20-25% share of the domestic syringe market. Currently, 「HLB」is focusing on the development of new anti-cancer drugs such as "Rivoceranib" that is for gastric cancer.

 

 

 

3. Major Business

 

■ Composite material business
As a second largest lifeboat manufacturer in the world, they are producing 700 lifeboats annually. In particular, this company succeeded in localization of lifeboats for excavation vessels and high-value-added lifeboats for ocean plants and cruises, which used to rely entirely on imports. In 2009, they started full-scale entry into the marine plant-related business by manufacturing GRP and GRE pipes, which are reinforced plastic pipes for the ocean. This business section accounts for 72% of total sales.

■ Biomedical device business
This is a business that「HLB」has begun to focus on relatively recently. They handle medical devices such as syringes, with a domestic market share of about 20-25%. Besides, this company has many subsidiaries around the world, in order to develop new drugs. This business accounts for 22% of total sales.

 

 

 

4. Financial information

 

※Unit is KRW 10 million

		2017	2018	2019
Consolidated sales		2,300	3,618	3,842
Consolidated operating profit		-2,611	-2,931	-4,873
Consolidated total assets		18,819	30,404	36,261
Consolidated net assets		11,367	20,952	18,924
Breakdown of sales	Composite material business	2,299	2,736	2,977
		-665	52	-548
	Biomedical device business	1	882	864
		-1,945	-2,984	-4,324