[Click eStock] HDC Hyundai Development Company, Attractive Undervalued Construction Stock "Raising Target Price"

[Asia Economy Reporter Lee Seon-ae] Daishin Securities maintained its 'Buy' rating on HDC Hyundai Development Company on the 9th and raised the target price by 11.1% from 36,000 KRW to 40,000 KRW. This is due to the expected business expansion amid the domestic housing supply increase trend and anticipation of a performance turnaround next year.

Lee Dong-heon, a researcher at Daishin Securities, explained, "The target price is based on the average book value per share (BPS) of 49,607 KRW for this year and next year, applying a target price-to-book ratio (PBR) of 0.8x," adding, "The target PBR reflects the average of major domestic construction companies."

HDC Hyundai Development Company's Q2 performance is estimated at sales of 891 billion KRW (-7% yoy) and operating profit of 128.8 billion KRW (-12% yoy). This exceeds consensus by +9% in sales and +11% in operating profit.

Sales remain stagnant due to the reduced pre-sales (6,000 units) in 2019, while operating profit is expected to reflect improvements in subcontracted housing cost ratios following Q1.

Pre-sales in 2020 are projected at 15,000 units, and as of Q1, the order backlog stands at 28.946 trillion KRW (+4.3% compared to 2019), indicating a performance trend of lower in the first half and higher in the second half for 2021, with full-scale growth starting in 2022. In other words, improvement is imminent.

The 2021 pre-sales target is 16,800 units, with 4,700 units targeted for the first half. Although only 2,800 units were pre-sold, major complexes such as Godeok Gangil and Pyeongtaek Godeok Phase 2 are expected to be affected by July pre-sales. The Kwangwoon University station area project has been postponed to 2022 but is expanding due to increased floor area ratio. Numerous in-house projects such as Yonghyeon Hakik, Gongneung, Incheon New Port hinterland, Uijeongbu mixed-use complex, and Yongsan Railroad Hospital site are expected to drive mid- to long-term performance. The researcher emphasized, "HDC Hyundai Development Company will benefit from station area development as a domestic housing-focused business" and added, "It also has undervaluation merits compared to other companies."