[Click eStock] "Daelim Industrial, Strong Performance in Housing Division Raises Expectations for Q4 Surprise"

[Asia Economy Reporter Koo Eun-mo] Daelim Industrial is expected to post better-than-expected results in the fourth quarter of last year, driven by strong performance in its housing division. Additionally, the solid pre-sale performance last year is anticipated to contribute to the subsidiary companies' results this year.

According to Korea Investment & Securities on the 8th, Daelim Industrial's fourth-quarter sales are estimated at 2.7 trillion KRW, down 1% year-on-year, while operating profit is expected to rise 79% to 299 billion KRW, surpassing consensus estimates. Kim Chi-ho, a researcher at Korea Investment & Securities, explained in a report on the same day, “High-margin proprietary projects recognized at once on a delivery basis in Q4 (e-Pyeonhansesang Chuncheon Hansup City, order backlog of 328.2 billion KRW) are driving sales and profits in the housing division, along with the normalization of domestic and overseas sites that recorded losses in the same period last year.” He added, “Notably, the gross profit margin of housing and construction sales, which account for 49% of total sales, improved by 7.0 percentage points compared to the previous year.”

The solid pre-sale performance last year is expected to contribute to subsidiary companies' results this year. Daelim Industrial's pre-sale units last year were approximately 24,000, a 59% increase compared to 15,000 units in 2018. Subsidiaries Samho and Goryeo Development also recorded pre-sales of around 10,000 units. Researcher Kim predicted, “Considering the characteristic of domestic construction companies where pre-sales soon lead to groundbreaking, the steady pre-sales last year will translate into expanded housing sales from this year onward.”

He continued, “This year, the contribution of subsidiaries' results will increase, with Goryeo Development, which graduated from workout after eight years, being included as a consolidated subsidiary, expected to contribute over 600 billion KRW in sales.” Additionally, the Cariflex division of Kraton, acquired in October last year, is also expected to contribute to this year's results.

The investment opinion was maintained as ‘Buy,’ but the target price was lowered from 128,000 KRW to 117,000 KRW. Researcher Kim stated, “Daelim Industrial's stock is trading at a historically low level with a 12-month forward price-to-earnings ratio (PER) of 4 times, amid the domestic construction market being suppressed by government real estate regulations and heightened US-Iran tensions. Although it is unfortunate that there is no expectation of large overseas orders exceeding 1 trillion KRW like competitors, the company achieved high profit margins through profitability-focused orders, and considering the workout graduation and increased subsidiary contributions from overseas investments, the valuation appeal remains valid.” However, he added, “Given the increasing proportion of the petrochemical business, concerns over the petrochemical industry's market conditions pose a short-term burden on the stock price.”

This content was produced with the assistance of AI translation services.