Expand Construction Equipment Sector Share "Strong in Second Half... Focus on Top Pick Stocks"

Preference for Construction Machinery and Power Equipment Industries... Top Preferred Stocks: Hyundai Construction Equipment and Doosan Bobcat

[Asia Economy Reporter Lee Seon-ae] Investment advice has been raised to increase the investment proportion in the construction machinery sector.

According to Shinhan Financial Investment on the 5th, a turnaround has begun in the traditional machinery sector, led by the construction machinery sector. Power equipment is expected to enter a recovery phase in the second half of the year. Shinhan Financial Investment prefers construction machinery, which continues to grow, and power equipment, which is expected to turn around. They analyzed that the valuation attractiveness is higher for construction machinery.

Hwang Eo-yeon, Senior Researcher at Shinhan Financial Investment, said, "I prefer the construction machinery sector the most in the second half," and presented Hyundai Construction Equipment and Doosan Bobcat as top pick stocks. Hyundai Construction Equipment has about 50% of its profit ratio from emerging countries outside China. It is expected to benefit from the expansion of fixed asset investment in emerging countries. Doosan Bobcat is expected to see continuous expansion in sales of small construction machinery due to the boom in the U.S. housing market.

The defense sector has continued solid growth even after COVID-19. The sluggish civilian sector (engine parts, airframe parts) is also expected to see sales growth from the second half. However, the valuation, which has risen excessively recently due to expectations for satellites and UAM, is burdensome. Researcher Hwang said, "Within the defense industry, I prefer LIG Nex1, which is undervalued compared to its profit growth potential."

The renewable energy sector is expected to continue sales growth in 2021 following strong orders in 2020. Concerns include a price-earnings ratio (PER) exceeding 30 during the interest rate hike period and an upward revision of the 2022 wind power installation volume, which is slower than expected. Researcher Hwang explained, "However, CS Wind is likely to receive relatively favorable evaluations due to its momentum for expansion in the U.S. and a high proportion of offshore wind power."