[Click eStock] Hyundai Construction, Earnings Exceed Expectations 'Top Pick'

Meritz Securities announced on the 24th that it maintains a Buy rating and a target price of 53,000 KRW for Hyundai Construction. Additionally, it upheld its position as the top pick within the sector. This is based on the judgment that the company will enter a full-scale revaluation phase following events that could improve overall investment sentiment in the housing market (such as the stabilization of some projects with concerns about insolvency).

Mungyeongwon, a researcher at Meritz Securities, stated, "Despite being a direct beneficiary of the global CAPEX cycle in various regions such as NEOM, Ukraine reconstruction, and expanded manufacturing investment due to the US IRA, concerns about the domestic housing market are overshadowing growth potential," adding, "It will soon benefit from the investment cycle that needs to be revalued."

Although the initial housing supply guidance of 20,000 units at the beginning of the year has become difficult, the opinion remains that 15,000 units can be achieved through the supply of 13,000 units in the second half of the year (with 1,200 units supplied separately in the first half). Researcher Mun noted, "The unsold inventory is also showing a downward trend compared to the beginning of the year," and pointed out, "If the groundbreaking of the CJ Gayang-dong site is confirmed by the end of the year, expectations for quasi-self-developed projects may also arise."

The consolidated operating profit for Q2 recorded 223.6 billion KRW (27.5%), exceeding the consensus of 188.1 billion KRW. The main cause was revenue growth (28.4%). Both separate sales, which saw full-scale housing completions such as Gaepo 1st Complex and Dunchun Jugong (41.2%), and engineering sales, which benefited from the rapid progress of battery factory construction orders secured in the first half (29.9%), performed well.

Researcher Mun explained, "Since this is not a temporary factor, it is necessary to raise the revenue outlook for both 2023 and 2024," adding, "Although there was no clear improvement in gross profit margin, given that expectations for profit margins have significantly lowered, the downward adjustment of consensus due to profit margin assumptions is expected to be limited."

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