HDC Hyundai Development Company Unable to Smile Despite Good Performance

[Asia Economy Reporter Song Hwajeong] HDC Hyundai Development Company recorded better-than-expected strong earnings in the first quarter of this year, but its stock price continues to weaken due to uncertainties surrounding the acquisition of Asiana Airlines. To see a stock price rebound, resolving acquisition uncertainties and improvements in the airline industry's business conditions are necessary, but these are expected to be difficult in the near term.

As of 9:45 a.m. on the 24th, HDC Hyundai Development Company (HDC Hyunsan) recorded 18,250 KRW, down 1.88% (350 KRW) from the previous day. This marks two consecutive days of decline.

Although HDC Hyunsan posted solid results in the first quarter, the stock price has not reflected this. HDC Hyunsan announced yesterday that its first-quarter sales and operating profit reached 1.0038 trillion KRW and 136.4 billion KRW, respectively. These figures represent increases of 13.8% and 35.7% compared to the same period last year.

Kim Seryeon, a researcher at Ebest Investment & Securities, said, "HDC Hyunsan recorded a surprise performance in the first quarter, exceeding consensus estimates by 15.5% in sales and 51.5% in operating profit," adding, "This was due to early occupancy in its own site, Cheongju Gagyeong 2 Complex, where revenue is recognized all at once upon delivery rather than being distributed based on construction progress."

The impact of COVID-19 on orders and performance was minimal. Kim Chiho, a researcher at Korea Investment & Securities, stated, "Even excluding the highly volatile in-house (development) division affected by occupancy schedules, the profit and loss impact on other divisions such as outsourced housing, civil engineering, and general construction was limited," adding, "The domestic sites are stabilizing quickly from the COVID-19 situation, so the impact is expected to remain small going forward." While overseas sites may inevitably be affected by site closures depending on circumstances, their proportion is not significant.

Uncertainty related to the acquisition of Asiana Airlines is acting as a factor weakening the stock price. Researcher Kim Seryeon analyzed, "The large cash generated from housing sales by HDC Hyunsan is being used to acquire the economically sensitive Asiana Airlines, postponing shareholder-friendly decisions such as large-scale facility investments, dividend increases, and share buybacks that could restore sales growth, which is why the stock price discount continues."

The post-acquisition outlook is equally uncertain. Researcher Kim said, "Although interest burdens will decrease due to the Asiana Airlines creditors' decision to support 1.7 trillion KRW in short-term loans and convert perpetual bonds into equity, it will be difficult to diagnose a downward valuation as consolidated earnings reflecting 61% of Asiana Airlines' shares will be included from the second half after full payment of the acquisition price."

The difficulty in improving the business conditions of the airline and real estate sectors is also a burden. Researcher Kim Chiho said, "For a stock price rebound, uncertainties regarding the acquisition of Asiana Airlines need to be resolved, and improvements in the airline industry or easing of real estate regulations leading to better construction business conditions must be confirmed, but both are expected to be difficult environments in the short term."

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