Q3 Operating Profit Up... Driving Stock Price Increase
Performance Improvement Trend Expected to Continue Until Next Year
[Asia Economy Reporter Minji Lee] GS Engineering & Construction is expected to continue improving its performance through next year, supported by strong housing supply and expectations for new businesses.
According to the Korea Exchange on the 21st, GS Engineering & Construction was trading at 27,700 KRW as of 10:40 AM, up 0.73% from the previous close. Foreign investors and institutions led the rise by purchasing 20,000 and 2,000 shares respectively. Since the 15th, GS Engineering & Construction's stock price has been on an upward trend, rising about 10% to date. During this period, institutions bought 838,661 shares, driving the index increase.
The third quarter operating profit reached 210.3 billion KRW, a 12% increase compared to the same period last year, which acted as a positive factor for the stock price. Contrary to concerns, annual housing sales exceeded targets. GS Engineering & Construction's cumulative sales for the third quarter reached 22,221 units, accounting for 87% of the 25,641 units planned at the beginning of this year. In the third quarter alone, 7,721 units were supplied, and the expected total sales volume for this year is estimated to exceed the previous forecast, reaching 29,000 units. If this estimate is met, it is expected to increase by about 75% compared to last year's 16,616 units. Hyunwook Kim, a researcher at Shinhan Financial Investment, said, "Raising expectations, apartment sales next year are expected to increase from the previous 25,000 units to 27,000 units," adding, "With the expected level of housing completions this year, solid profitability will also be maintained."
The order situation is also not bad. The cumulative new orders for the third quarter amounted to 7.5 trillion KRW, achieving 65.3% of the annual target (11.5 trillion KRW). In the domestic market alone, orders worth 6.28 trillion KRW were secured, achieving 76% of the domestic target.
As the housing sector's performance improvement trend is analyzed to remain valid through next year, expectations for further stock price increases are also rising. Above all, next year, growth in new business sectors such as GS Inima and overseas modules is expected to be prominent. So far, GS Engineering & Construction has actively invested, unlike competing construction companies, by entering the local building materials business in Vietnam, renewable energy business, and acquiring a European module company. As a result, the new business sector is expected to record sales of 270 billion KRW in the fourth quarter, a 40% increase compared to the previous quarter (189 billion KRW). Next year, annual sales are projected to reach 860 billion KRW.
Accordingly, the securities industry is presenting GS Engineering & Construction as the top preferred stock among construction sectors and raising its target price. The target price, which was in the low 30,000 KRW range, has been raised by about 10% to the 36,000 KRW to 40,000 KRW range. Seong Jeonghwan, a researcher at Hyundai Motor Securities, explained, "Meaningful sales will also occur in Vietnam development projects such as Nabe and Tuttiem," adding, "Attention should be paid to the strong intention to expand into the data center business as well."
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