[Click eStock] Hyundai Construction Equipment, a 'Quantum Jump' Possible if It Acquires Doosan Infracore

Hyundai Heavy Industries Holdings Emerges as Leading Candidate to Acquire Doosan Infracore
Potential Synergies in Parts, Sales, and Technology Without Additional Costs

[Asia Economy Reporter Minwoo Lee] As Hyundai Heavy Industries Holdings emerges as a strong candidate to acquire Doosan Infracore, there are expectations that Hyundai Construction Equipment will benefit from this.

On the 25th, Daishin Securities maintained a 'Buy' rating on Hyundai Construction Equipment and raised the target price by 27% to 39,000 KRW. The growing possibility of Hyundai Heavy Industries Holdings acquiring Doosan Infracore has increased optimism toward Hyundai Construction Equipment, a subsidiary in the construction machinery sector.

Recently, Hyundai Construction Equipment's stock price, which had fallen to 21,500 KRW at the end of August, rose about 43% to 30,800 KRW as of the previous day. Despite this, the price-to-book ratio (PBR) remains at 0.5 times, the lowest among global construction equipment companies. Since its spin-off from Hyundai Heavy Industries in 2017, the company has experienced a decline in profits during a business restructuring period.

Hyundai Construction Equipment's sales last year were 2.8521 trillion KRW, about 77% of Doosan Infracore's 3.6763 trillion KRW. The market capitalization gap is even larger. As of the previous day, it was 606.8 billion KRW, only 32% of Doosan Infracore's 1.8979 trillion KRW. Researcher Dongheon Lee from Daishin Securities explained, "The undervaluation is judged by the difference in operating profit margins (Infracore 9.8%, Hyundai Construction Equipment 5.5%, excluding Bobcat for Infracore), and Hyundai Construction Equipment has a high potential for profit margin improvement through business normalization," adding, "The Doosan Infracore sale issue is positive news."

Meanwhile, in the main bid for Doosan Infracore held the previous day, Hyundai Heavy Industries Holdings is considered a strong acquisition candidate. GS Construction, which participated in the preliminary bid, reportedly did not participate in the main bid. If Hyundai Heavy Industries Holdings acquires Doosan Infracore, Hyundai Construction Equipment can expect synergies in parts, sales, and technical aspects without incurring additional costs.

Researcher Lee said, "Although the acquisition structure and the ongoing five-year lawsuit issue with Doosan Infracore China (DICC) have not been confirmed, Hyundai Construction Equipment has an opportunity to highlight its relative value," and predicted, "If Hyundai Heavy Industries Holdings ultimately succeeds in acquiring Doosan Infracore, Hyundai Construction Equipment will benefit regardless of the acquisition structure."