This Sector Surged on Nuclear Power Momentum... Will It Hold Up in the Second Half? [Weekend Money]

There is a forecast that stock price volatility in the domestic construction sector will be greater in the second half of this year compared to the first half.

On May 9, Shinhan Investment Corp. stated in a report titled "A Time for Selection and Focus," "The stock price level of construction companies has risen, but it is now necessary to validate the potential through contract awards," explaining this outlook.

The report noted, "The market will increasingly demand verification of the actual scale of benefits through specific contract wins in the construction sector," and added, "While the mid- to long-term momentum for nuclear power remains valid, we recommend a selection and concentration strategy based on a realistic contract pipeline."

The report specifically pointed out that, from a mid- to long-term perspective, expectations for an increase in global nuclear power plant contracts remain valid; however, short-term fatigue from rapid stock price surges, a shift in capital flows to other sectors, and slower-than-expected nuclear power contract wins could all increase stock price volatility in the construction sector. Each of these factors independently contributes to the increased volatility.

This year, the performance of major domestic construction companies is expected to be low in the first half and high in the second half. Following the completion of large-scale projects last year, new contract awards and housing pre-sales have declined, resulting in weak first-quarter revenue performance this year. However, the quarterly revenue of GS E&C and DL E&C is likely to improve based on strong pre-sale results. DL E&C and IPARK Hyundai Development Company are expected to see significant profit growth in the housing division from this year onward due to improved profitability.

However, nuclear power plant contracts have fallen short of expectations. Although multiple nuclear power projects are under discussion, they have not been launched simultaneously. Because these large-scale projects—which carry significant risks of construction delays and soaring costs—are being pursued at the national level, more time is needed for arranging financial resources and finalizing the value chain.

There is also a need to prepare for potential instability in the supply of construction materials due to the crisis in the Middle East. Until the second quarter of this year, companies can rely on secured inventories to mitigate supply instability, but if the war is prolonged, there is a risk that profitability will deteriorate.

Sunmi Kim, a research analyst at Shinhan Investment Corp., advised, "We maintain our recommendation to overweight the construction sector, but a selection and focus strategy based on the contract pipeline is necessary."

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