[Click eStock] Hyundai Construction Wins 6.5 Trillion KRW Saudi Contract... Potential for Target Price Upgrade

Ebest Investment & Securities evaluated Hyundai Engineering & Construction's Saudi Arabia contract news on the 26th as a much-needed achievement amid stagnant overseas orders and judged that there is a possibility of further upward revision of the target stock price if upside is confirmed through additional contract acquisitions.

Researcher Kim Seryeon of Ebest Investment & Securities said, "Hyundai Engineering & Construction's forward price-to-book ratio (Forward PBR) is 0.45X, which is considered excessively undervalued even after applying a housing discount, given that global companies receive multiples of at least 1X." He added, "The current target price is based on Hyundai Engineering & Construction's 5-year average PBR of 0.7X, and there is potential for further upward revision of the target price depending on additional contract acquisitions."

Hyundai Engineering & Construction signed a contract for the Saudi Aramco's mega project packages 1 and 4 at the Amiral petrochemical complex in Jubail, Eastern Saudi Arabia. The contract amount is $5 billion, with Hyundai Engineering & Construction accounting for $2 billion and Hyundai Engineering $3 billion, although contract amounts and conditions may change in the future. Package 1 involves ethylene cracker facilities, and package 4 involves utility facility construction. Packages 2 and 3 were awarded to Italy's Tecnimont.

This amount exceeds 60% of Hyundai Engineering & Construction's consolidated annual order target of 10.7 trillion KRW and is roughly equivalent to 90% of last year's consolidated overseas orders of 7.1 trillion KRW. Due to this contract, South Korean construction companies' overseas construction order performance in the first half of the year is estimated to be at least $13.7 billion, surpassing $12 billion in the same period last year. Since the beginning of the year, the order momentum for domestic construction companies has expanded due to aggressive production capacity expansion by energy companies, but actual order achievements have been delayed or lost, weakening the overseas order momentum of Hyundai Engineering & Construction and Samsung Engineering. In particular, delays in project financing due to liquidity risks stemming from U.S. commercial real estate, increased oil price volatility, and negotiations over EPC construction costs due to rising raw material prices are estimated to have caused overall delays in the bidding market.

Researcher Kim said, "Despite these difficulties, Hyundai Engineering & Construction's recent mega project order in Saudi Arabia is a meaningful achievement that rekindles expectations for overseas plant orders." He added, "However, since Hyundai Engineering & Construction already received the Letter of Award (LOA) for this project on April 27, it is necessary to consider that the market is somewhat aware of this order." He continued, "Nevertheless, Hyundai Engineering & Construction has additional order momentum waiting this year, such as Saudi Jafurah 2 and Saudi NEOM Spine Tunnel, making this a time when Middle East-originated order momentum is expected to be further highlighted within the year."

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