[Click eStock] "GS Geonseol, Policy Momentum Expansion Phase"

[Asia Economy Reporter Minji Lee] Ebest Investment & Securities maintained a buy rating on GS Engineering & Construction on the 5th and set a target price of 55,000 KRW. Although the first-quarter earnings are expected to fall short of market expectations, the stock price is anticipated to show an upward trend due to hopes for the government's easing of supply regulations.

GS Engineering & Construction's first-quarter sales are expected to be 2.3329 trillion KRW, down 4.8% year-on-year and 6.6% below expectations. Operating profit is estimated at 202.2 billion KRW, up 18% year-on-year but 5.8% below the market forecast of 214.7 billion KRW.

Researcher Se-ryeon Kim of Ebest Securities said, "Rather than margin issues, sales growth is unlikely to meet market expectations due to external business conditions," adding, "Sales at overseas sites such as Singapore and Myanmar have slowed due to the impact of COVID-19."

In the domestic housing sector, the first quarter is traditionally an off-season, but it is believed that heavy snowfall made cost inputs difficult. Researcher Kim explained, "Last year's pre-sales were 26,900 units, a 62% increase compared to the previous year, so an annual housing sales turnaround is certain. However, due to the supply gap in the second half of 2019, the seasonal factors in the first quarter have a greater impact on sales compared to other companies."

This year, GS Engineering & Construction is expected to show a profit turnaround by securing growth in housing sales, which contributes the most to profits. Although annual sales growth is not prominent due to negative growth caused by a lack of orders in the plant division, fundamental improvements are expected from performance growth in housing and new businesses.

Expectations for the government's easing of supply regulations are also positive. Researcher Se-ryeon Kim said, "With hopes for easing supply regulations, the long-suppressed private reconstruction market will also breathe new life," adding, "GS Engineering & Construction, which has a high proportion of urban redevelopment, is in a period where policy momentum is expanding."

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