'Daechangju' Hyundai Construction, From Pre-Sale to Overseas Orders, Ready for the Second Half

11,000 Units Sold in First Half... Approaching Last Year's Annual Sales Volume
Strong Overseas Orders... Positive Performance Outlook for Second Half

[Asia Economy Reporter Minwoo Lee] Despite the significant impact of the novel coronavirus disease (COVID-19) in the first half of the year, Hyundai Engineering & Construction is regarded as having performed well. Positive pre-sale trends and overseas orders remain favorable factors for the second half, leading to expectations of steady growth.

On the 12th, Shinhan Financial Investment forecasted that Hyundai Engineering & Construction would achieve consolidated sales of 4.2961 trillion KRW and operating profit of 222.5 billion KRW in the second quarter of this year. These figures represent decreases of 8.2% and 9.2%, respectively, compared to the same period last year. Considering the COVID-19 impact, including reduced overseas sales, poor cost ratios, and construction site closures, the performance is seen as commendable.

In fact, orders proceeded smoothly both domestically and overseas in the first half. Including Qatar Lusail Plaza Tower PLOT 3 and 4 (1.1 billion USD) and Panama Metro 3 (1.4 billion USD), orders are estimated at around 4.4 trillion KRW. Domestically, including the largest redevelopment project, Hannam New Town Zone 3 (1.8 trillion KRW), the first half alone is estimated to have recorded 7.8 trillion KRW, exceeding the separate annual guidance.

In the second half, announcements are expected for projects such as the Qatar LNG liquefaction plant (5 to 10 billion USD), Qatar hospital (500 million USD), Saudi Arabia Zafurah PKG3 (1.5 billion USD), and Iraq thermal power plant (1.5 billion USD). Domestically, results for orders such as Hongje Zone 3 and Heukseok Zone 9 are also pending.

The pre-sale trend is also smooth. About 8,000 units were pre-sold in the second quarter, bringing the total apartment pre-sales in the first half to 11,000 units. This surpasses half of the annual target of 21,000 units set at the beginning of the year and approaches last year’s annual volume of 13,000 units. The annual pre-sale target was recently raised to 23,000 units, which is analyzed to be fully achievable considering the market atmosphere.

In the shrinking domestic redevelopment market going forward, Hyundai Engineering & Construction is expected to demonstrate competitiveness based on abundant financial resources. Hyunwook Kim, a researcher at Shinhan Financial Investment, stated, "Winning the Hannam Zone 3 order is expected to have a brand recognition (The H) effect through securing the largest redevelopment complex rather than individual site profitability." He added, "A virtuous cycle of favorable bidding conditions and orders utilizing financial mobilization superiority and brand strengthening is anticipated." Furthermore, favorable factors remain, including the second half’s Qatar LNG liquefaction plant order, the full-scale groundbreaking of GBC at year-end, expansion of in-house construction through cooperation with developers, and announcements of cash utilization plans.

Against this backdrop, Shinhan Financial Investment maintained a 'Buy' rating on Hyundai Engineering & Construction and raised the target stock price to 45,000 KRW. The closing price on the previous trading day was 33,400 KRW.