[Click eStock] "DL E&C, Plant Sales Performance Improvement Point... Suitable for Bottoming Out"

Daishin Securities maintained a buy rating and a target price of 50,000 KRW for DL E&C on the 19th, stating that although the immediate earnings are sluggish, plant sales, which will be a key point for earnings improvement, are expected to expand soon.

DL E&C's consolidated sales for the third quarter of this year are forecasted to increase by 3.1% year-on-year to 1.91 trillion KRW, while operating profit is expected to decrease by 33.8% to 77.1 billion KRW. These forecasts fall short of market consensus estimates.

Researcher Lee Taehwan of Daishin Securities explained, "The separate housing cost ratio still exceeds 90%, and since the proportion of plant sales, which will be a key point for future earnings improvement, is low, profit improvement is at a slow stage. Plant sales are expected to expand significantly from the fourth quarter."

He added, "The turnaround point is not far off, with separate cumulative new orders for the third quarter estimated at 8.7 trillion KRW. The Seongnam ‘Baekhyeon MICE project’ was accounted for in the third quarter, and although separate cumulative housing starts are sluggish at around 2,000 units, considering the current order trend, housing starts are expected to recover to the average level of 15,000 units next year."

The researcher also noted, "While the immediate decline in housing sales and earnings slump may be uncomfortable, attention should be paid to the remarkable increase in plant orders this year. The cumulative plant orders for the third quarter reached 2.65 trillion KRW, surpassing last year's annual order amount, and considering the expected pipeline for the fourth quarter, achieving the 3.5 trillion KRW target is within sight."

Plant-based sales next year are expected to be around 3 trillion KRW, more than double the forecasted performance for 2023. This is anticipated to offset the annual decline in housing sales while contributing to profitability improvement. Despite the sluggish investor sentiment in construction stocks due to rising interest rates and safety management issues, DL E&C is evaluated as the most suitable stock for bottoming out.

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