Hyundai Construction, Growth Issues Since 2021... Target Price Down 30%

[Asia Economy Reporter Park Jihwan] Meritz Securities on the 1st raised questions about the growth engine of Hyundai Construction since 2021. While maintaining a buy rating, the target price was lowered by 30.2% from the previous 63,000 KRW to 44,000 KRW.

Researcher Park Hyungryeol of Meritz Securities evaluated on the 1st that Hyundai Construction is expected to post decent results this year, but the issue lies in whether growth will continue after 2021.

Sales in the first quarter of this year reached 4.1 trillion KRW, a 4.7% increase compared to the previous year, but operating profit decreased by 19.4% to 165.3 billion KRW. This was due to the write-off of accounts receivable related to the Venezuelan refinery plant, and currently, there are no remaining accounts receivable. Pre-tax profit exceeded consensus due to increased gains related to foreign exchange.

This year's performance is expected to maintain a slight growth trend. Researcher Park Hyungryeol analyzed, "Due to real estate-related regulations and delays in the start of reconstruction and redevelopment projects, housing sales decreased from 21,000 units in 2018 to 13,000 units in 2019."

Researcher Park forecasted, "To defend against the slowdown in the most profitable housing sector, the company is expanding its own projects, and the sales plan for this year is 20,000 units, with future sales expected to continue at the level of 15,000 to 20,000 units."

Regarding overseas orders, it is expected that orders will increase from 4.4 trillion KRW in 2019 to 8 trillion KRW in 2020. Already, overseas orders in the first quarter recorded 4.2 trillion KRW, including the Panama Metro, and expansion of projects related to Gas and hospitals is anticipated.

Researcher Park explained, "The part of the market that can clearly grow after COVID-19 is the global infrastructure order market expansion," and added, "Among construction companies, Hyundai Construction is expected to play a role as an alternative stock in the phase of infrastructure market expansion."

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