[BizHanKook] The Korea Exchange (KRX) has officially designated 151 listed companies that have been undervalued for an extended period as "low PBR (Price-to-Book Ratio) companies." This includes 96 firms on the KOSPI and 55 on the KOSDAQ. The initiative aims to inform investors about companies whose stock prices have remained below their book value for a long time within their respective industries, thereby encouraging them to improve their corporate value. The exchange announced these details on November 1 and stated that the list would be made public starting the 2nd.
At One-Quarter of Net Assets… How Were They Selected?
PBR is an indicator calculated by dividing a company's stock price by its book value per share. A ratio below 1 indicates that the market evaluates the company at less than its stated book value. The average PBR of the companies selected this time is 0.25, meaning their market capitalization is only about one-quarter of their net assets. By market, the average PBR is 0.24 for the 96 KOSPI firms and 0.25 for the 55 KOSDAQ firms. According to the KRX, as of the 30th of last month, the average PBR of the entire KOSPI was 1.43, and the KOSDAQ was 1.60, indicating a significant gap compared to the listed companies.
The selection criterion is "cumulative bottom-tier performance over 3 years." Based on data from the 22nd of last month, the KRX examined 2,431 companies (779 on KOSPI, 1,652 on KOSDAQ), excluding those with grounds for delisting, and analyzed their PBR across 11 sectors based on the Global Industry Classification Standard (GICS). The primary screening targeted companies that fell within the bottom 25% for KOSPI or the bottom 10% for KOSDAQ for six consecutive half-year periods, or six out of the last seven half-year periods. This initial process identified 185 candidates (115 KOSPI, 70 KOSDAQ).
The final list was confirmed at 151 after removing 34 companies (19 KOSPI, 15 KOSDAQ). Companies that had already disclosed their "Corporate Value Enhancement Plans"—which include PBR improvement strategies—by the 22nd of last month were granted a one-year exemption from the list, considering this was the first public announcement. A total of 62 companies submitted plans, and 34 out of the 49 that met the initial criteria received this exemption. 15 companies (10 KOSPI, 5 KOSDAQ) were included in the list despite submitting plans because they failed to escape the bottom-tier criteria over a cumulative six-year period (12 consecutive half-year periods or 12 out of 13). The remaining 13 companies did not meet the initial low-PBR criteria.
Materials, Retail, and Finance Sectors Broadly Included
The list includes numerous well-known large corporations. On the KOSPI, E-Mart (0.15), Lotte Shopping (0.17), Hyundai Steel (0.19), Lotte Chemical (0.18), Hanwha Life (0.27), Kolong (0.15), Hanjin (0.17), and Taekwang Industrial (0.23) were included. Financial firms such as DB Financial Investment, Hyundai Motor Securities, and Heungkuk Fire & Marine Insurance were also on the list. On the KOSDAQ, KCC Engineering & Construction (0.20), Humax (0.20), Dongwon Development (0.17), Spigen Korea (0.31), and Kook-soondang (0.26) were named. Hanshin Engineering & Construction had a recent half-year PBR of 0.14, meaning the market values the company at roughly 14% of its book net assets.
By sector, the KOSPI list was dominated by materials (23 firms), industrials (22), consumer discretionary (18), and consumer staples (12). The KOSDAQ list was led by IT (17 firms), followed by industrials and healthcare (10 each), and materials (6).
After the Labeling… Consulting and Shareholder Engagement
The list will be posted on the "Value-up Page" of the Korea Exchange's Listing Disclosure System (KIND) from the 2nd until May 3, 2027, the day before the next scheduled announcement. A 'Low PBR' tag will also appear next to the stock names on securities firms' Home Trading Systems (HTS) and Mobile Trading Systems (MTS). The timing and method of the display may vary by firm. The announcements are scheduled for the first trading day of May and November each year, with the next update set for May 4, 2027.
The labeling itself is not the ultimate goal. The initiative intends to drive practical efforts to enhance shareholder value, such as increasing dividends, share buybacks and cancellations, and improving capital efficiency. This is also a follow-up measure to the government's "Capital Market Vitalization Plan" (announced last March) to resolve the "Korea Discount," a phenomenon where the domestic stock market is undervalued relative to the actual value of companies. The KRX will provide one-on-one customized PBR improvement consulting for all 151 listed companies to help them analyze the causes of their undervaluation, set goals, and establish plans. Simultaneously, the Financial Services Commission (FSC) will revise and monitor the implementation of Stewardship Code guidelines to encourage institutional investors to actively engage with low-PBR companies.