Silicon2 Co., Ltd. (KRX:257720) reported ₩402.6bn of revenue in the June quarter. That was its highest ever. Operating income was ₩83.0bn. That is a 20.6% operating margin for a distributor. Whirlpool doesn't earn that. Most consumer-goods brands don't either.
Then look one statement over. Operating cash flow for the same quarter was negative ₩92.4bn. For the whole of FY2025 the company earned ₩168.6bn of net income. It generated ₩1.1bn of operating cash. Not ₩1.1bn per month. ₩1.1bn for the year.
My view is that both numbers are true, that they are connected, and that the second one is the one to underwrite. An earlier piece here covered the new investor and the preferred-share terms. This one is about the operating business on its own.
Eight quarters of data from DART make the case for the business. Revenue went ₩186.7bn, ₩173.6bn and ₩245.7bn. It then reached ₩265.3bn, ₩299.4bn and ₩305.9bn. The final figures were ₩346.6bn and ₩402.6bn. This sequence runs from Q3 2024 to Q2 2026. Every quarter since the start of 2025 has been higher than the one before.
Operating margin over the same eight quarters started at 22.8%, 15.3% and 19.4%. It then ran 19.7%, 21.1% and 13.9%. The final figures were 18.6% and 20.6%. The two dips are both fourth quarters. Korean press coverage attributes the Q4 pattern to seasonality and regulatory issues in some markets. The data fits that. Outside of Q4 the margin has stayed between 18.6% and 22.8% for two years.
Gross margin tells a similar story with less noise. It was 32.0% in the latest quarter. Earlier figures were 30.0%, 28.5% and 31.6%. Then came 32.9% and 31.6%. Those were the five before. A distributor holding a 30% gross margin while doubling revenue in eighteen months is unusual. It says the company has pricing power with the brands it carries. Or the brands need its shelf access more than it needs any one of them.
The growth is now coming from the two markets a US reader cares about. Korean press citing the Q2 release puts Europe at ₩173.4bn, up 62%. It puts North America at ₩87.3bn, up 79%. Those two together are about 65% of the quarter. The regional split in the DART statements doesn't go that deep, so I'm relying on the press figures for the mix.
Now the other statement. Inventory was ₩451.0bn at June 30. It was ₩339.3bn three months earlier. It was ₩300.1bn at the end of FY2025. That compares with ₩145.9bn at the end of FY2024 and ₩78.5bn at the end of FY2023. It has grown 5.7 times in two and a half years. Revenue grew about 3.3 times over the same span.
The June quarter's cost of sales was ₩273.6bn. Against that, inventory covers about 150 days. That inventory is 1.12 times a full quarter's sales. For a business selling face cream and sheet masks, five months of stock is a lot of face cream.
Receivables add to it. Trade receivables were ₩118.7bn at June 30, up from ₩42.2bn at the end of FY2024. Together, inventory and receivables tie up ₩569.7bn. That is more than the company's total revenue for all of FY2024.
The cash flow statement shows what that costs. Quarterly operating cash flow since Q3 2024 started at ₩51.6bn and ₩23.8bn. It then ran negative ₩9.9bn, negative ₩21.4bn and ₩28.7bn. The final figures were ₩3.7bn, ₩105.9bn and negative ₩92.4bn. The Q1 2026 figure looks like a break in the pattern. Then Q2 gives most of it back. The first half nets to ₩13.5bn of operating cash against ₩126.7bn of net income.
To be fair to the company, this is what a fast-growing distributor looks like. The distributor has to buy stock before it sells it. If revenue keeps compounding at this rate, inventory will keep rising. Operating cash will then keep lagging earnings. Is the lag a growth cost? Or is it a sign that stock is piling up faster than it sells? The data doesn't answer that. Inventory days on cost of sales went from about 130 in Q2 2025 to about 150 now. So the stock is turning a little slower even as sales accelerate.
Cash and equivalents were ₩82.3bn at June 30, down from ₩107.4bn in March and ₩149.9bn a year earlier. Total equity rose from ₩492.0bn in March to ₩688.9bn in June. That rise far exceeded the quarter's ₩72.3bn of net income. The difference is the new capital covered in the earlier piece. Financing activities brought in ₩41.5bn in the quarter. Investing activities were a ₩25.8bn inflow. That fits the press report of a gain on selling a brand investment.
So the company funded a ₩92.4bn operating cash outflow with new equity and an asset sale. That is fine once. It is not a model.
Non-current liabilities fell from ₩138.8bn in March to ₩53.7bn in June. Meanwhile, current liabilities rose to ₩221.9bn. Some long-term debt appears to have moved short-term. Interest expense was ₩1.8bn in the quarter, small against ₩83.0bn of operating income. So the balance sheet isn't stretched. It just isn't generating cash.
The company's market capitalisation was ₩3.1 trillion at Friday's close of ₩48,000. Trailing four-quarter net income is ₩220.9bn, so the shares trade at about 14 times. On FY2025 net income of ₩168.6bn it is 18.7 times.
Fourteen times earnings for a company growing revenue 52% year on year is not expensive on the income statement. On the cash flow statement it is a different multiple. The company hasn't produced a full year of operating cash that resembles its earnings since FY2024. That year it made ₩60.1bn of operating cash on ₩120.7bn of net income. That was the year inventory grew ₩67bn. In FY2025 inventory grew ₩154bn and operating cash vanished.
The shares are 11% below the 52-week high of ₩54,200 and 58% above the low of ₩30,400. The market seems to be paying for the income statement and hoping the cash follows.
The bear reading of the inventory could be too harsh. K-beauty brands launch constantly and go viral unpredictably. A distributor that wants to catch the next one has to carry breadth. Some of the ₩451.0bn is the price of being the aggregator, not a stockpile of things that didn't sell. The company's gross margin holding above 30% suggests it hasn't yet had to discount stock to move it.
The bull reading of the margin could also be too generous. Twenty percent operating margins attract competition. Brands can go direct through Amazon or TikTok Shop. Larger distributors can enter. Nothing in the eight quarters shows that pressure yet, but nothing in the model prevents it.
Tariffs are a third unknown. The Q2 release mentions a ₩1.1bn tariff refund. That is a rounding error. But it means the company is paying US tariffs on Korean-made goods. It doesn't control the rate.
The Q3 report is due in November. It has one line that matters more than the rest. If operating cash flow is positive and inventory growth slows below revenue growth, the first half was a working-capital build ahead of the holiday season. In that case, the cash lag is a timing issue. If operating cash is negative again and inventory passes ₩500bn while revenue grows less than 50%, the warehouse is winning.
The second thing to watch is inventory days on cost of sales. It was 150 in June. Above 160 in September would say stock is turning slower still. Below 140 would say the second-quarter build is selling through.
kstock reads DART every morning and writes up what moved — the contract, the buyback, the number that does not add up. The daily post and a Saturday roundup, by email.