[Click eStock] "GS Geonseol, Large-scale Cost Recognition Inevitable for 'Parking Lot Collapse'... Target Price Down"

NH Investment & Securities on the 7th significantly lowered the target price for GS Construction from the previous 23,000 KRW to 16,500 KRW. The investment rating was maintained at neutral (HOLD).

GS Construction decided to completely reconstruct the entire apartment complex in Geomdan New Town, Incheon, where an underground parking lot collapse accident occurred in April. The industry estimates the related costs to be approximately 350 billion KRW. However, this amount is not yet finalized, and the timing of cost recognition is also uncertain, resulting in significant uncertainty.

NH Investment & Securities, taking into account the 350 billion KRW cost, estimated GS Construction's annual operating profit for this year at 256.3 billion KRW, which is a 54% decrease compared to last year.

Researcher Minjae Lee of NH Investment & Securities stated, "Following the collapse accident at HDC Hyundai Development Company's Gwangju Hwajeong I-Park in 2022, the collapse accident at GS Construction's Geomdan in Incheon inevitably raises doubts about the domestic housing business." He added, "Moreover, the real estate market is expected to continue facing difficulties in the second half of the year due to a decrease in supply, an increase in unsold units, and reverse jeonse (lease) trends." He further noted, "Just as the construction industry's valuation was fundamentally adjusted due to large-scale losses at overseas sites in the 2010s, this issue is also likely to cause the construction industry's valuation to be formed at a level lower than the current price-to-earnings ratio (PER) of around 5 times."

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