[Click eStock] "GS Geonseol, Housing Division Profit Margin Doubles... Target Price Up 22%"

[Asia Economy Reporter Park Jihwan] Ebest Investment & Securities announced on the 26th that GS Construction's gross profit margin in the housing sector for the fourth quarter of last year reached 32%, more than double the past level. The investment opinion was upgraded to 'Buy' and the target price was raised by 22.2% from the previous 45,000 KRW to 55,000 KRW.

Researcher Kim Seryeon of Ebest Investment & Securities stated, "GS Construction's fourth-quarter sales amounted to 2.8173 trillion KRW, similar to the same period last year and 4.2% above consensus." Operating profit was 205.7 billion KRW, a 12.9% increase compared to the same period last year, meeting the consensus operating profit expectations.

The encouraging part is that the housing gross profit margin recorded an all-time high margin of 32%. GS Construction's housing gross profit margin was previously around 15-20%, but recently, due to the expansion of construction sites and economies of scale, the relatively lower margin has been solidified at 20%. Researcher Kim explained, "Although the margin is exceptional due to completion settlement profits arising from increased move-in volumes, it is significant as it reconfirms GS Construction's housing strength."

In particular, considering that there was a one-time increase in selling and administrative expenses of about 145 billion KRW due to bad debt write-offs of accounts receivable from completed construction caused by the prolonged COVID-19 pandemic, the results are practically an earnings surprise, according to Researcher Kim.

GS Construction succeeded in supplying 26,900 housing units last year, and an earnings turnaround is expected through securing growth in housing sales, which contributes the most to profits. Although annual sales growth is not prominent due to negative growth caused by a gap in orders in the plant sector, it is evaluated as a year to look forward to fundamental improvements driven by performance growth in housing and new businesses.

Researcher Kim emphasized, "With the government's recent easing of supply regulations, there is growing anticipation that the previously suppressed private reconstruction market will also breathe new life," adding, "GS Construction's stock price, which has high exposure to urban maintenance, is also expected to expand its policy momentum."