[Click eStock] "Hyundai Construction, Stock Undervalued Even After Contingent Liability Adjustment"

Target Price Lowered by 7.5% to 49,000 Won

On the 9th, Korea Investment & Securities maintained a 'Buy' rating on Hyundai Construction, stating that even after adjusting for contingent liabilities, the current stock price remains undervalued. However, they announced a 7.5% downward revision of the target price to 49,000 KRW, considering the book value per share (BPS) reflecting high-risk contingent liabilities in this year's net asset estimates.

Researcher Kang Kyung-tae of Korea Investment & Securities explained the reason for lowering Hyundai Construction's target price: "We adjusted the BPS by deducting 310 billion KRW of high-risk contingent liabilities from the 2024 net asset estimate," adding, "This method was devised to uniformly discount construction companies exposed to project financing (PF) following the Taeyoung Construction incident."

However, the company’s operations are progressing smoothly, and financial stability is deemed excellent, as the contingent liabilities related to PF guarantees can be fully covered by cash and cash equivalents held.

Consolidated sales for the fourth quarter of last year are expected to reach 8.2647 trillion KRW, exceeding consensus estimates by 8.3%. Operating profit is forecasted at 220.8 billion KRW, surpassing market expectations.

Although growth in the housing sector is expected to stagnate due to the recent real estate market downturn, plant and group company construction sales this year are anticipated to offset this. Researcher Kang Kyung-tae stated, "With only 5,900 housing units started last year, the housing sector’s scale will stagnate going forward, but plant and group company construction sales will drive the company’s overall growth," adding, "Despite consecutive large plant construction orders last year, the current plant construction order backlog alone amounts to 20 trillion KRW."

Accordingly, consolidated sales for this year are estimated at 30.6162 trillion KRW, a 4.4% increase from last year. Considering that the 10-year average consolidated sales from 2012 to 2021 was 16.8 trillion KRW, this represents a significant growth trend.

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