[Click eStock] "GS Geonseol's 2Q Slump, Starting Performance Recovery from 3Q"

Sales Growth Outlook in Construction and Housing Sector
Overseas Orders and Listing of Water Treatment Subsidiary Also Drive Growth

[Asia Economy Reporter Minwoo Lee] GS Engineering & Construction, which posted somewhat sluggish results in the second quarter, is expected to recover starting from the third quarter. This outlook is based on the growth in housing sales and anticipated expansion of infrastructure-related orders in the second half of the year.

On the 27th, Meritz Securities maintained its 'Buy' rating on GS Engineering & Construction and raised the target price by 5.6% to 57,000 KRW. The closing price on the previous day was 40,550 KRW.

GS Engineering & Construction recorded consolidated sales of 2.2317 trillion KRW and operating profit of 124.9 billion KRW in the second quarter of this year. These figures represent decreases of 12.39% and 24.35%, respectively, compared to the same period last year. The market consensus was also missed by approximately 10.75% and 14.12%, respectively. Sales in the construction and housing sectors were around 1.4 trillion KRW, down 5.1% year-on-year. However, the gross profit margin for housing was high at 26.3%, due to settlement profits from completion at three project sites and efforts to adjust cost rates at some sites.

Reflecting past pre-sale and groundbreaking situations, housing and construction sector sales are expected to increase significantly from the second half of the year. Hyungryul Park, a researcher at Meritz Securities, stated, "Quarterly average sales in the housing and construction sectors have been around 1.4 trillion KRW, but in the third and fourth quarters, they are expected to exceed 1.7 trillion KRW. Considering the current profitability of the housing sector, second-half performance is likely to surpass market expectations."

The stock price, which had been adjusted due to sluggish first-half performance and exhaustion of policy momentum, is expected to recover through overseas new orders, improved earnings, and subsidiary listings. Regarding infrastructure orders, GS Engineering & Construction was selected as the preferred negotiator for the Northeast Link project in Australia, and the 1.4 trillion KRW Oman seawater desalination project by its water treatment subsidiary GS Inima is also expected to be recognized in the second half. GS Inima plans to go public in the first half of next year. Researcher Park explained, "Considering the rising valuations of environment-related companies, the listing of GS Inima could emerge as a momentum driver."

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