Up 141% YTD, Still Undervalued? [Click eStock]

On April 16, iM Securities maintained its "Buy" investment opinion on DL E&C and raised its target price from 60,000 won to 145,000 won.

Bae Seho, a researcher at iM Securities, stated, "DL E&C's year-to-date (YTD) return has risen by 141%, and its price-to-book (P/B) ratio has increased from 0.3 times to 0.7 times." He added, "Nevertheless, it remains undervalued compared to the average P/B ratio of 1.3 times for the construction sector under our coverage." He further explained, "Among its competitors, DL E&C shows the clearest margin improvement trend, has low project financing (PF) risk, a net cash structure, and owns real estate assets such as Glad Yeouido. Considering these factors, the current book value per share (BPS) is highly reliable." He recommended DL E&C as one of his top picks in the construction sector.

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Bae projected this year’s operating profit at 486 billion won, noting that the direction for improvement in operating profit is clear. He added that if the plant division secures additional orders, the company can expect further growth in scale in the coming years.

He also mentioned that there are expectations for securing orders for Small Modular Reactors (SMRs) in addition to the company’s core business. Last month, DL E&C signed a standardized design contract with U.S. SMR company X-Energy. If DL E&C successfully completes this project, it could reasonably expect to participate in X-Energy’s SMR construction contracts in the future. He further noted that there are business opportunities in large-scale nuclear power plants as well. Bae cited the case of DL E&C participating as a non-lead contractor in the Hanbit Nuclear Power Plant Units 5·6, completed in 2002, and commented, "If Team Korea’s nuclear power export efforts accelerate, there will be increased opportunities for non-lead contractors, in addition to the main contractors."

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