[Click eStock] "DL E&C, Q3 Earnings Hit Bottom and Turnaround Begins in Earnest"

Daishin Securities maintained a buy rating and a target price of 50,000 KRW for DL E&C on the 27th, anticipating a full-scale turnaround starting from the third quarter performance bottom this year.

DL E&C's consolidated sales for the third quarter amounted to 1.84 trillion KRW, down 0.6% year-on-year, and operating profit decreased by 30.9% to 80.4 billion KRW. The operating profit met market consensus estimates.

Researcher Lee Taehwan of Daishin Securities explained, "The separate housing cost ratio for the third quarter recorded 93.0%, rising compared to the previous quarter," adding, "This was due to one-time costs reflected at sites nearing completion amid a shortage of cumulative separate housing starts at 2,133 units."

He continued, "If contract changes proceed as planned in the fourth quarter, cost ratio improvement is possible," and noted, "Plant sales in the third quarter reached 225.6 billion KRW, with slow revenue recognition compared to the increased order backlog. However, the Shahin project is expected to start generating sales in the fourth quarter, expanding the scale. We forecast approximately 2.2 trillion KRW in sales from the plant sector next year."

While the housing sector's profitability showed slower improvement than initially guided, it is expected that the turnaround starting in the fourth quarter will proceed as planned, with a limited decline in housing sector performance next year. Additionally, significant growth is anticipated in the plant sector.

Lee said, "This is the most suitable stock for bottoming out in the construction sector," and added, "On the 18th, DL E&C announced plans to delist DL Construction, its 100% owned subsidiary, by exchanging DL Construction shareholders' holdings for new shares of DL E&C."

He further stated, "To prevent dilution of shareholding, the company plans to cancel 2.94 million treasury shares equal to the number of new shares issued, and will purchase an additional 1.69 million treasury shares over about three months, expecting to resolve valuation undervaluation and increase dividend resources."

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