Ahead of Low-PBR List Release, 62 Companies Submit Improvement Plans; Link to Executive Pay Remains Weak

[Financial News] Ahead of the release of a list of low-PBR (price-to-book ratio) companies, 62 listed firms have put forward plans to improve corporate value. While they proposed expanding shareholder returns and strengthening profitability, a considerable number were found not to be following through on key measures, such as incorporating PBR into executive compensation or communicating regularly with shareholders.
According to the Korea Exchange and the Financial Supervisory Service’s electronic disclosure system on the 25th, by the 22nd, 34 companies on the KOSPI and 28 on the KOSDAQ had disclosed PBR improvement plans using the exchange’s template. The simple average PBR of these companies was about 0.3x. A PBR below 1x means a company’s market capitalization is lower than its net assets on the books.
The exchange will release its first list of low-PBR companies on the 2nd of next month. The list will cover companies whose PBR has ranked in the bottom 25% of the KOSPI or the bottom 10% of the KOSDAQ for six consecutive half-year periods, within one of the 11 sectors under the Global Industry Classification Standard (GICS). Companies that submitted improvement plans by the 22nd, seven trading days before the announcement, may be excluded from the list for one year. However, long-term low-PBR companies that met the low-PBR criteria for a cumulative six years will be included regardless of whether they submitted plans.
In their self-assessments, companies with a market capitalization of at least 100 billion won frequently cited weak industry conditions and structural issues in their sectors. DB Securities pointed to polarization in the securities industry based on capital size and a lack of economies of scale compared with larger firms. Hyundai Motor Securities cited, among other factors, delays in selling major investment assets due to a market contraction.
Steelmakers also stressed difficulties across the sector. KG Steel cited the structural discount applied to the steel industry and declining profit margins amid a worsening sales environment. Dongkuk Steel Mill Co., Ltd. identified oversupply from China, a slump in domestic construction, and U.S. tariffs of 50% as constraints on growth.
SD Biosensor cited a decline in related sales since COVID-19, while Gwangju Shinsegae pointed to limits on sales and profit scale due to regional constraints, as well as the department-store industry’s entry into maturity. The impact of industry characteristics and growth conditions on PBR was also raised as an issue when the policy to release a list of low-PBR companies was introduced.
There were gaps in compliance with key indicators intended to support improvements in corporate value. BNK Financial Group and Lotte Corporation, among the plan submitters with the largest market capitalizations, had a 70% compliance rate for key indicators, but did not include PBR in executive key performance indicators (KPIs) or link it to their compensation systems. Other companies gave similar responses or said they would consider doing so in the future.
Noncompliance was common among companies with smaller market capitalizations on the measure of whether executives and boards communicate with shareholders at least twice a year. Among the 15 companies at the bottom of the ranking, only a few—including Digi, GMI Venture, Wonil Special Steel, and Daewon—said they met the indicator.
Some companies also presented specific targets and ways to achieve them. Dongkuk Holdings set a goal of raising its PBR from 0.17x this year to at least 0.3x in 2028. It plans to apply a minimum dividend per share (DPS) of 80 won starting with dividends paid next year, and to explore new revenue sources, including an artificial intelligence (AI) data center business, to boost profitability.
Bionote set a target PBR of 1x for 2029. It plans to raise its return on equity (ROE) by expanding platforms for diagnosing new diseases, growing sales at its U.S. subsidiary and establishing a local production base, and developing antibody therapies. Some companies, by contrast, proposed a PBR of at least 1x without specifying when they would reach it, or offered only general plans to improve profitability and internal structures.
Financial authorities initially estimated that about 220 companies would be subject to disclosure. About 120 of them are long-term low-PBR companies that will not be exempt even if they submit improvement plans. Depending on whether the remaining companies submit plans, the final list could include fewer than 200 companies.
The exchange believes that companies that do not meet the disclosure criteria, as well as long-term low-PBR companies, are also among those that submitted improvement plans. It is verifying the final list of companies based on market capitalization, total equity, and other factors as of the 22nd.
[email protected] Lee Jeong-hwa Reporter