[Click eStock] "HDC Hyundai Development Company, Profit Growth Expected with Full-Scale In-House Projects... Target Price Up"

Target Price Raised by 18% Compared to Previous Level

Yuanta Securities on the 30th raised the target price for HDC Hyundai Development Company from 25,000 KRW to 29,500 KRW, citing expected profit growth due to the full-scale launch of its own projects. The investment rating was maintained at 'Buy.'

Researcher Jang Yoon-seok of Yuanta Securities stated, "We raised the target price by 18% following adjustments to profit estimates and the appropriate price-to-book ratio (PBR)." He explained, "The stock price of HDC Hyundai Development Company surged 25% over the past month due to improved sentiment in the construction sector, driven by the possibility of a real estate market recovery following interest rate cuts. However, the valuation remains at a 12-month forward price-to-earnings ratio (PER) of 5.4 times, staying within the 4 to 6 times PER band that has persisted since the 2018 spin-off." He added, "Considering the expectations for profit growth from earnings recovery and the full-scale launch of its own projects, including the H1 Project (Kwangwoon University Station area development), we believe the premium can be justified."

HDC Hyundai Development Company's second-quarter performance this year met market expectations. Researcher Jang said, "Second-quarter sales increased by 16% year-on-year to 1.0872 trillion KRW, and operating profit rose 839% to 53.8 billion KRW, in line with consensus estimates (average securities firm forecasts)." He analyzed, "Despite a 14% decrease in sales from its high-margin own projects, the overall profit improved due to an increased proportion of sales from large-scale projects with relatively high profitability, such as Dunchon Jugong, which reduced the cost ratio in the outsourced housing sector to 88%. It is noteworthy that the company has entered the 80% range for housing project cost ratios without one-off gains such as settlement profits."

Improvement in cost ratio and recovery in order performance are expected. Researcher Jang said, "Due to the impact of two accidents in Gwangju, housing pre-sales dropped sharply to 9,600 units in 2021 and 4,300 units in 2022, reducing the potential for external growth. This has acted as a mechanism to defend profitability amid construction cost inflation." He added, "Along with the cost ratio, order performance is also expected to recover significantly, recording 2.3 trillion KRW cumulatively as of July compared to the previous year. The commencement of the H1 Project, with a total project cost of 4.5 trillion KRW and an estimated gross profit margin (GPM) of over 20% in November this year, will serve as a basis for mid- to long-term performance differentiation."

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