[Click e-Stock] "DL E&C Enters Fastest Cost Improvement Cycle"

Possibility of Expanding U.S. SMR Business Grows

There is analysis suggesting that DL E&C is emerging from a prolonged period of deteriorating housing cost ratios. With the expansion of its small modular reactor (SMR) business in the United States, the company's performance is also expected to improve.

On July 1, KB Securities issued a "Buy" investment rating for DL E&C and set a target price of 74,000 won. The previous day's closing price was 51,800 won.

For the second quarter of this year, DL E&C’s consolidated results are projected to be 1.955 trillion won in revenue and 109 billion won in operating profit. Although revenue is expected to decrease by 5.6% year-on-year, operating profit is forecast to surge by 235.7%. The separate housing division’s cost ratio is expected to reach 88.8%, which aligns with the company's earlier guidance that “after a temporary slump in the first quarter, a full-fledged improvement in results will begin from the second quarter.”

Since DL E&C is expected to be the company that exits the tunnel of worsening cost ratios the fastest, its stock price is likely to respond fully to positive catalysts. The fact that X-energy, a fourth-generation SMR company collaborating with DL E&C, is gaining momentum amid the U.S. government-led nuclear renaissance is also a positive factor. DL E&C is one of X-energy’s initial investors. Although the company has not yet secured the rights to perform SMR EPC (engineering, procurement, and construction) projects in the U.S., its chances of securing business opportunities in SMR and related infrastructure facilities have increased significantly.

Kang Minchang, a researcher at KB Securities, stated, “Despite a 69% increase in the stock price this year, the current price is only at 0.41 times the 12-month forward price-to-book ratio (PBR) and 5.6 times the price-to-earnings ratio (PER).” He added, “The improved government credibility as DL E&C enters a housing cost ratio improvement cycle, the potential for increased operating profit, and the benefits from the U.S. SMR business have hardly been reflected in the share price.”

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