[Click eStock] Hyundai E&C: Nuclear Power Contracts and Middle East Expectations Raise Target Price

"Slower Share Price Growth Due to Higher Middle East Exposure Compared to Peers"
First-Quarter Results Expected to Be Stable...In Line with Market Expectations

On April 9, Hana Securities raised its target price for Hyundai Engineering & Construction to 240,000 won, reflecting optimism over nuclear power plant project orders and expectations for projects in the Middle East, while maintaining its 'Buy' investment rating.

Kim Seungjun, a research analyst at Hana Securities, stated, "The lack of nuclear project news regarding Hyundai Engineering & Construction last month and the company's relatively high Middle East exposure compared to other construction firms led to a slower share price increase." He added, "In the second quarter, sentiment could improve due to the easing of concerns about the possible reopening of the Strait of Hormuz, expectations for Middle East reconstruction, and nuclear project contracts in the second quarter. Therefore, we are raising our target price."

This year, expectations are high for the company to win major projects, including overseas nuclear power plant orders. Hyundai Engineering & Construction's Matador project for Fermi America in the United States, which the company has secured, is scheduled to complete its Front End Engineering Design (FEED) at the end of this month, followed by negotiations for an Engineering, Procurement, and Construction (EPC) contract structure in the second quarter. The main contract is expected to be signed in July, with groundbreaking targeted for the end of the year.

The large-scale nuclear project in Bulgaria is expected to complete its Engineering Services Contract (ESC) next month, and the contract is likely to be extended until the main contract, which is anticipated in the fourth quarter. The construction of a small modular reactor (SMR) at the Palisades site in cooperation with U.S. nuclear company Holtec is also expected to result in a contract in the second quarter.

Based on internal company simulations, Hyundai Engineering & Construction predicts that ongoing Middle East projects and domestic procurement of materials will not be significantly affected by the ongoing war in the Middle East. Kim explained, "We are planning to procure materials through alternative routes, and the related costs will be discussed with the client (claim order)." He added, "Domestic procurement of materials may be affected by naphtha supply, but we expect the impact to be minimal, at around 1-2%."

First-quarter results are also expected to be stable. Hana Securities estimates first-quarter revenue and operating profit at 6.9 trillion won (down 7.7% year-on-year) and 161.3 billion won (down 24.5%), respectively. This is in line with the market consensus for operating profit of 160.1 billion won.

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