[Click eStock] 'Turned to Deficit' Hyundai Construction Equipment... Most Undervalued Among Construction Equipment Stocks

[Asia Economy Reporter Lee Myunghwan] Daishin Securities announced on the 7th that it has lowered the target price of Hyundai Construction Equipment from 67,000 KRW to 52,000 KRW, a 7.1% decrease. However, the investment rating was maintained as a buy.

Hyundai Construction Equipment's sales in the fourth quarter of last year increased by 19% year-on-year to 820.8 billion KRW. Operating profit recorded a loss of 11.7 billion KRW, turning into a deficit. While sales exceeded market expectations by 3%, operating profit turned to a loss, contrary to the market's initial forecast of a 14 billion KRW profit, according to Daishin Securities.

Daishin Securities evaluated that sales increased due to rising demand driven by higher raw material and energy prices. Looking at Hyundai Construction Equipment's sales by region, sales increased significantly mainly in North America and Europe. The North American and European markets showed strong performance with sales increasing by 58% and 23%, respectively. In contrast, the Chinese market saw a 46% decrease, and the domestic market experienced a 26% decline in sales.

Regarding the operating loss, it was analyzed that raw material and logistics costs had an impact. Lee Dongheon, a researcher at Daishin Securities, said, "The reflection of a 31.4 billion KRW provision for ordinary wages (operating profit 22.2 billion KRW), rising raw material prices, increased logistics costs, provisions for the Chinese subsidiary, and increased development expenses caused operating profit to be lower than expected."

Daishin Securities pointed out that Hyundai Construction Equipment is the most undervalued among construction equipment stocks. According to Hyundai Construction Equipment's management plan for this year, the target sales amount is 3.56 trillion KRW, 0.3% higher than the previous year, and operating profit is expected to increase by 7% to 220 billion KRW.

Researcher Lee said, "Although the Chinese construction equipment market has peaked and is declining, causing construction equipment companies' stock prices to fall, Hyundai Construction Equipment, which has a large proportion of emerging markets, is stable."

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