[Into the Stock] 'Another Collapse Accident' HDC Hyundai Development Company Stock Price Crumbles

[Asia Economy Reporter Lee Seon-ae] The stock price of HDC Hyundai Development Company plummeted. This was due to deteriorating investor sentiment following the collapse of an apartment exterior wall at the Hwajeong I-Park construction site in Seo-gu, Gwangju. In June of last year, a collapse accident also occurred at a redevelopment site where HDC Hyundai Development Company was the contractor. Due to the consecutive accidents, individual investors expressed anxiety and consistently sold off shares, closing the stock price at 20,850 KRW, down 4,900 KRW (19.03%) on the 12th. The market capitalization evaporated by a staggering 323 billion KRW in just one day. As HDC Hyundai Development Company's safety management capabilities came under scrutiny, the impact extended to group stocks as well. The combined market capitalization of HDC Hyundai Development Company, HDC, and HDC Labs decreased to 2.1996 trillion KRW on the 12th, losing 426.3 billion KRW in a single day.

On the 13th, right at the start of trading, HDC Hyundai Development Company's stock movement was unusual. Starting at an opening price of 19,800 KRW, it showed a decline of about 3%, reflecting severe anxiety. Since the collapse accident recurred just over seven months after the previous one, HDC Hyundai Development Company's stock price is expected to remain uncertain for the time being. Especially with the Serious Accident Punishment Act about to be enforced, there is a growing possibility that the government will strictly investigate the cause of the accident and hold the contractor accountable, increasing downside risk for the stock price. The fact that the company has been involved in consecutive major accidents is also a factor intensifying concerns that future domestic contract awards may become difficult.

The movements of securities firms covering HDC Hyundai Development Company were quiet on this day. No investment opinions were issued through reports. A securities firm analyst commented, "If competing construction companies continue to mention this accident in relation to redevelopment contract bids, it will inevitably damage brand value and cause anxiety over performance concerns."

[Image source=Yonhap News]

Damage to ESG (Environmental, Social, and Governance) management is also inevitable. This could lead institutional investors to review their investments and potentially withdraw funds.

Earlier, securities firms' downward revisions of target stock prices also accelerated the anxiety. On December 20, BNK Investment & Securities lowered HDC Hyundai Development Company's target price from 38,000 KRW to 32,000 KRW, a 15.8% cut, due to poor performance. HDC Hyundai Development Company's cumulative sales for the third quarter this year decreased by 14.8% compared to the same period last year. This was because the 2019 pre-sales, a major foundation for this year's performance, were very poor at about one-third of the previous three-year average. Operating profit on a cumulative third-quarter basis also plunged by 30.6%. However, Lee Seon-il, a researcher at BNK Investment & Securities, predicted, "New pre-sales have rebounded for two consecutive years recently, and orders have increased," adding, "Growth is expected to resume this year."

Since the beginning of this year, there have been investment opinions highlighting the company's high mid- to long-term investment attractiveness. Based on the cumulative new pre-sales, it is judged that performance improvement will be possible from this year onward. Rajin-seong, a researcher at KTB Investment & Securities, analyzed, "Although the stock price trend has remained sluggish due to last year's poor housing supply and performance, as well as sentiment damage from the Gwangju accident, the mid- to long-term investment attractiveness is high due to the full-scale performance turnaround, the start of REITs development projects, and increased orders."

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