The KOSPI index is dominated by traditional industries such as steel and chemicals, while the KOSDAQ is led by information technology (IT) firms.
According to the Korea Exchange, the list of low price-to-book ratio (PBR) companies revealed a clear division among sectors. Major listed companies, including Lotte Chemical and Hyundai Steel, along with Spigen Korea, were identified as long-term undervalued firms.
As of November 1, the KOSPI had 96 companies with low PBR, with the materials sector accounting for the largest share at 23 companies, followed by industrials with 22, consumer discretionary with 18, and consumer staples with 12. These four sectors represented approximately 78% of the total.
In the materials sector, companies such as Lotte Chemical (0.18), Hyundai Steel (0.19), Taekwang Industrial (0.23), and Youngpoong (0.17) were included. In the industrials sector, firms like Hanjin (0.17), Kolon (0.15), and Kyeryong Construction (0.19) were selected.
Retail companies also showed significant undervaluation. Lotte Shopping's PBR was recorded at 0.17, while Lotte Hi-Mart and E-Mart were both at 0.15. A PBR below 0.2 indicates that the market values the company at less than 20% of its book value.
In the KOSDAQ market, the IT sector had the highest representation with 17 companies, making up about 31% of the 55 low PBR firms listed. Industrials and healthcare followed with 10 companies each. Notable IT firms included Spigen Korea (0.31), Eyes Vision (0.17), and Ecobolt (0.14).
One noteworthy aspect of this announcement is that even if companies submitted plans for enhancing corporate value, their inclusion on the list varied based on the duration of their undervaluation.
The exchange identified 185 companies that met the low PBR criteria. Among these, 49 submitted plans for improving their PBR, but 34 were excluded from the announcement, while 15 remained on the list. This is because companies that have been in the bottom tier of their sector's PBR for 12 consecutive half-years or for 12 out of the last 13 half-years are not exempt from exclusion, even if they submitted improvement plans. This indicates that stricter criteria were applied to firms with prolonged undervaluation.
The selection of low PBR companies was based on relative evaluations within sectors rather than absolute PBR figures. For instance, the bottom 25% PBR threshold for the IT sector in the KOSPI was 0.63, while for the materials sector, it was 0.27. This means that the same PBR could lead to different selection outcomes depending on the market and sector.
This announcement allows investors to more easily assess the long-term undervaluation of individual companies. The exchange plans to provide one-on-one consulting for the 151 companies selected next year, focusing on analyzing the causes of undervaluation and developing improvement plans.
A representative from the Korea Exchange stated, "Some companies have struggled to accurately diagnose the causes of their low PBR or to formulate specific improvement measures. We will analyze the causes of low PBR for each company and support tailored improvement plans that enhance capital efficiency, increase shareholder returns, and improve governance structures."
In the securities industry, there are calls for measures beyond just the announcement of the list to enhance the corporate value of listed companies. A securities industry representative noted, "It is difficult to see the public disclosure of low PBR companies leading to a short-term rise in stock prices. Since the causes of undervaluation vary by company, it is crucial that this does not end with a simple announcement but leads to genuine efforts to enhance corporate value through increased shareholder returns and improved profitability."
* This article has been translated by AI.
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