[Click eStock] "GS Geonseol Q1 Earnings Below Expectations... Maintains Top Pick"

[Asia Economy Reporter Ji Yeon-jin] Yuanta Securities announced on the 12th that although GS Construction's first-quarter earnings this year are expected to fall short of expectations, new businesses focused on construction and environment, as well as the Vietnam development project, will be growth points, maintaining a target stock price of 54,000 KRW and the top pick opinion in the construction sector.

GS Construction's first-quarter sales this year are estimated at 2.32 trillion KRW, a 5.2% decrease compared to the previous year, while operating profit is expected to increase by 17.6% to 201.1 billion KRW, slightly below market expectations. This is due to delayed sales from housing sites in the skeleton stage sold last year, as well as the anticipated reflection of a slowdown in sales from large affiliate plant projects nearing completion.

On the other hand, in the new business sector, sales expansion of GS Inima and overseas modular units (such as Danwood) is expected to continue. Due to the bad debt write-off of approximately 150 billion KRW for unbilled construction work in the fourth quarter of last year (Qatar Metro 55 billion KRW, Saudi PP-12 90.6 billion KRW), the possibility of additional overseas costs being reflected in the first quarter is considered low. Gains and losses related to foreign exchange due to the rise of the won-dollar rate are expected to contribute to pre-tax profit improvement.

This year's housing sales are expected to exceed 30,000 units, up from the existing 28,600 units (reflected in the cumulative third quarter), with the addition of new projects and the Gimhae self-developed project (568 units). A clear trend of performance improvement due to increased housing sales is also expected to continue. The first-quarter housing sales performance is about 5,500 units, somewhat less than the existing plan of 9,722 units.