[Click eStock] Hyundai Construction, 3Q Operating Profit Expected at 164.4 Billion KRW... 31% Decrease YoY

Possibility of Additional Cost Reflection Due to Overseas On-Site COVID-19 Impact↑
New Orders Are Sailing Smoothly... Concrete Steps for New Business Also Key

[Asia Economy Reporter Minwoo Lee] Hyundai Engineering & Construction is expected to record an operating profit of around 160 billion KRW in the third quarter. This is attributed to the fact that major overseas sites were directly hit by the novel coronavirus infection (COVID-19). On the other hand, domestic sites were relatively less affected by COVID-19 and the rainy season.

On the 14th, Yuanta Securities forecast that Hyundai Engineering & Construction would record consolidated sales of 4.062 trillion KRW and an operating profit of 164.4 billion KRW in the third quarter of this year. These figures represent decreases of 0.6% and 31.2%, respectively, compared to the same period last year. The results were evaluated to be in line with the lowered market consensus.

Following Jun-gi Jeon, the possibility of additional cost reflection at major overseas sites due to COVID-19 is cited as the cause of the sluggish performance. Ki-ryong Kim, a researcher at Yuanta Securities, explained, "The Karbala refinery project in Iraq, which reflected an additional cost of about 40 billion KRW last quarter, is scheduled to resume construction from mid-this month," adding, "On the other hand, domestic projects including housing were relatively less affected by COVID-19, the rainy season, and typhoons."

New order performance is on track. From the beginning of this year to the third quarter, new orders on a separate basis are estimated at about 14 trillion KRW (9 trillion KRW domestic, 5 trillion KRW overseas). It is expected to virtually achieve the annual target of 14.6 trillion KRW. Researcher Kim analyzed, "Additional achievements from the existing overseas order pipeline such as the Iraq refinery (1.5 to 2 billion USD), power plants (1.5 billion USD), Baghdad train (about 1.25 billion USD), and Saudi Zafura (1.2 to 1.5 billion USD) will clearly show an improvement in order performance," and added, "Qatar LNG is also understood to have completed the commercial bidding as planned on the 15th of last month." During the same period, domestic housing sales on a separate basis reached about 15,000 units, already surpassing last year's total of about 13,000 units.

Against this backdrop, Yuanta Securities maintained a 'Buy' investment opinion and a target price of 45,000 KRW for Hyundai Engineering & Construction. The opinion of the construction sector's top pick was also maintained. The closing price on the previous day was 30,750 KRW. Researcher Kim predicted, "Uncertainties and the possibility of poor performance in overseas businesses due to COVID-19 will continue for a short period," but added, "However, the abundant order backlog will serve as a clear foundation for performance recovery once uncertainties are resolved, and the concretization of new businesses such as renewable energy and eco-friendly projects is expected to be a point for stock price rebound."

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