Leveraged OEM, real discount at the blended KRW rate · +71% upside
BUY — the debt is real, but the equity is still too cheapBase intrinsic value ₩20,864/share after a 12% controlled-company haircut (pre-haircut ₩23,709) vs market ₩12,200. The low/high KRW risk-free bookends still print ₩22,024 / ₩19,768, and the Monte Carlo p5 is ₩17,025 — the discount survives the rate-regime test.
What it sells, where it sells
Operating segments
The operating story is mostly apparel/handbag OEM, but the hotel consolidation changed the balance sheet. Manufacturing drives revenue and customer risk; the hotel drives asset intensity, debt, and the need to model the company as more than a simple Apparel screen.
Country mix (revenue-weighted CRP input)
A pure revenue read would make this almost all US-brand demand plus Korea. The supplier/labor override matters: Vietnam, Indonesia, Cambodia, and Guatemala are where tariff, wage, and shutdown risk hits margins even though the invoices go to Western buyers.
Background — five things to know before the case
Context the share price doesn't carry on its face. Skim this once and the bull / bear bullets below stop reading as inside baseball.
- FY2025 was a real earnings base, not just a low-quality spike. Revenue reached ₩1.29T and EBIT ₩140.5B; Q1 2026 revenue of roughly ₩308B and operating profit of roughly ₩30.8B confirmed the run-rate did not immediately break.
- The customer list is concentrated but blue-chip. Gap, Michael Kors, Guess, American Eagle, and Walmart are the named top buyers. That supports volume visibility but caps pricing power.
- The hotel acquisition changed the capital stack. Gross debt is about ₩830B and cash/current financial assets about ₩153B; the equity is cheap only after explicitly subtracting the debt.
- Observed beta is rejected as suppressed. A ~0.75 regression beta is too low for a controlled, leveraged KOSPI small-cap. The model uses bottom-up Apparel β_u and re-levers it.
- Governance is a haircut, not the thesis. JS is an operating company with real dividends, not a trapped holdco. The 12% haircut prices founder/family control and hotel capital allocation risk after the cash flows already carry the debt burden.
Where we diverge from the sector
Each row asks: if we'd used the sector median for this one assumption instead of our override, how much would the share price change? Negative = our override is more conservative (worth less); positive = more aggressive (worth more). Skim down the rightmost column to see which bets are doing the work.
The story & the five claims
The 10-year story this DCF is built on, plus the five anchor claims that translate the story into valuation inputs.
The 10-year story
JS Corporation looks like a cheap Korean small-cap because it is a cheap Korean small-cap, but the right question is whether the debt and control discount fully explain the price. On a clean FY2025 base the company produced ₩1.29T of revenue and ₩140.5B of EBIT across handbags, apparel, and hotel operations. The model refuses the easy bull case: apparel growth slows to mid-single digits, margins fade from the strong FY2025 mix, the observed beta is replaced by a bottom-up 1.84 levered beta, and a 12% governance haircut is applied after the DCF. It also uses the blended KRW risk-free rate from the low-yield-currency methodology, not the most flattering bond-only rate. After all of that, intrinsic value is ₩20,864/share against a ₩12,200 market price, and the high-rate bookend still gives ₩19,768. The market is discounting the capital stack and family/control overhang, but at this price it is over-discounting them.
Two debates worth pressure-testing
- We use a blended KRW risk-free, not a one-way low-rate build. The base is 3.82%; the high bookend still supports the thesis.
- We reject the 0.75 regression beta. The levered beta is 1.84 after bottom-up re-levering, which materially lowers value.
- We model the hotel separately. It is not Apparel economics; it is capital-heavy and debt-backed.
- We haircut governance after modeling the cash flows. The 12% haircut is residual. Debt, reinvestment, and terminal ROC already carry most of the risk.
- We use diluted shares. The equity bridge is deliberately not flattering on conversion/option dilution.
- Customer concentration breaks the apparel margin. If Gap/AEO/Walmart orders slow or force price concessions, the 9% apparel margin is too high.
- Hotel leverage consumes the equity. Refinancing or capex pressure would make the hotel asset a debt sink rather than an earnings stabilizer.
- Tariffs hit production countries. Vietnam, Cambodia, Indonesia, and Guatemala exposures are margin risks even if revenue is booked to US buyers.
- Observed beta is right after all. If the market beta reflects genuinely low risk rather than suppressed trading, the stock is even cheaper; that is an upside risk to the bearish view, not a downside.
- Governance worsens. A non-core hotel expansion, weak payout discipline, or related-party leakage would push the haircut toward 20%+.
Risks to thesis (tail, not bear case)
About ₩830B of gross debt sits ahead of the equity. The model subtracts it, but refinancing at higher KRW rates or hotel capex overruns would compress the equity value quickly.
Gap, Michael Kors, Guess, American Eagle, and Walmart are large buyers with pricing leverage. Volume visibility comes with margin pressure.
Vietnam, Indonesia, Cambodia, China, and Guatemala are operating exposures. A tariff or shutdown shock hits margins before it appears in revenue geography.
The model fades hotel margin to 15%. A worse tourism cycle or maintenance-capex wave would make the 2024 acquisition look mistimed.
The company passes the direct-cash-return test through dividends, but founder/family control and non-core capital allocation justify a standing haircut.
10-year forecast
Revenue ₩1.29T → ₩1.81T over 10y. Handbags grow 2.0% Y1-5, apparel 4.5%, hotel 3.5%, then all fade to 2.75% terminal. Aggregate operating margin fades from 10.9% to about 10.1% by year 5.
Monte Carlo distribution
The Monte Carlo is decisively above market: p5 ₩17,025 / p50 ₩20,672 / p95 ₩24,685, with P(intrinsic < market) = 0% across 1,000 draws around the blended-rate base. The distribution is not saying the business is low risk; it is saying the current price already over-discounts the risks modeled.
Mean ₩20761.81 ± ₩2364.80/sh, 1000 iterations (0 failed). P(intrinsic < market ₩12200.00) = 0.0%.
Cost of capital build
| Risk-free rate | 3.82% |
| Mature-market ERP | 4.23% |
| Levered β | 1.84 |
| Weighted CRP | 1.31% |
| Cost of equity | 14.03% |
| Pre-tax cost of debt (synth A3/A-) | 4.71% |
| D / V | ~69% |
| WACC | 6.77% |
Full year-by-year DCF
| Year | Revenue | Op mgn | EBIT | EBIT(1−t) | Reinvest | FCFF | PV |
|---|---|---|---|---|---|---|---|
| 1 | ₩1.34T | 10.74% | ₩143.56B | ₩103.51B | ₩32.72B | ₩70.79B | ₩66.30B |
| 2 | ₩1.39T | 10.57% | ₩146.66B | ₩105.74B | ₩34.02B | ₩71.73B | ₩62.92B |
| 3 | ₩1.44T | 10.41% | ₩149.84B | ₩108.04B | ₩35.36B | ₩72.67B | ₩59.70B |
| 4 | ₩1.49T | 10.24% | ₩153.10B | ₩110.38B | ₩36.77B | ₩73.62B | ₩56.64B |
| 5 | ₩1.55T | 10.08% | ₩156.43B | ₩112.79B | ₩38.23B | ₩74.56B | ₩53.73B |
| 6 | ₩1.61T | 10.07% | ₩161.97B | ₩117.27B | ₩37.69B | ₩79.58B | ₩53.55B |
| 7 | ₩1.66T | 10.07% | ₩167.40B | ₩121.70B | ₩36.93B | ₩84.77B | ₩53.09B |
| 8 | ₩1.72T | 10.07% | ₩172.67B | ₩126.05B | ₩35.96B | ₩90.09B | ₩52.36B |
| 9 | ₩1.77T | 10.07% | ₩177.77B | ₩130.30B | ₩34.79B | ₩95.52B | ₩51.36B |
| 10 | ₩1.81T | 10.07% | ₩182.66B | ₩134.44B | ₩33.43B | ₩101.01B | ₩50.10B |
Methodology & flags
Damodaran FCFF DCF, 10y explicit + perpetuity, in KRW. Risk-free
3.82% (local-currency government bond). Synthetic credit A3/A-. CRP
1.31% from revenue-weighted country mix × Damodaran 2026 CRPs.
Terminal ROIC faded to 9.50%; 12% governance haircut applied
post-DCF. Monte Carlo: 1000 iterations. Engine v1.0.0 · result:
/Users/valentin/Documents/notes_jiliac_labs/Finance/Damodaran/valuations/jscorp/output/2026-06-01-result.json
- R&D cap: OFF · Lease cap: OFF · Failure: ON · ESO: OFF
- Governance haircut: 12% applied post-DCF (₩23708.77 > ₩20863.72)
- Sensitivity tornado: not run