[Click eStock] "GS Geonseol, Housing Division Needs Sales Growth"

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[Asia Economy Reporter Gong Byung-sun] GS Construction's third-quarter earnings this year are expected to fall short of market consensus. Securities analysts interpret that growth in the housing sector, which drives earnings, is necessary.

On the 6th, Ebest Investment & Securities estimated GS Construction's third-quarter sales to be 2.2667 trillion KRW, a 2.2% decrease compared to the same period last year, and operating profit to be 208.9 billion KRW, a 0.2% decrease over the same period. This falls short of the consensus sales and operating profit of 2.4978 trillion KRW and 236.5 billion KRW by 9.3% and 11.7%, respectively.

The sluggish growth in the housing and construction sectors is interpreted to have a negative impact on earnings. Despite strong past pre-sale performance, the housing and construction sectors, which are major growth drivers, recorded lower-than-expected sales growth rates for two consecutive quarters. While sales in the fourth quarter of last year reached 2.817 trillion KRW, sales in the first and second quarters of this year were only 2.014 trillion KRW and 2.232 trillion KRW, respectively. Additionally, the third quarter being a seasonal off-peak period negatively affected the sales and operating profit estimates.

However, Ebest Investment & Securities observes significant growth potential in the housing sector. Researcher Kim Se-ryeon of Ebest Investment & Securities explained, "Considering the pre-sold housing performance, there is sufficient upward momentum," adding, "When the peak construction season in the housing sector arrives in the upcoming fourth quarter, clear year-over-year growth will appear." The steady growth due to an increase in construction sites is also a factor to look forward to in the long term.

New businesses are also being prepared. The new business division's Spanish water treatment company Inima is expected to be listed in the first half of next year. Additionally, sales from new business sectors such as electric vehicle battery recycling, data center construction, and California reconstruction are also expected to grow gradually.

Accordingly, Ebest Investment & Securities maintained its investment opinion of "Buy" on GS Construction with a target price of 60,000 KRW. The closing price on the previous day was 41,550 KRW.

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