[Asia Economy Reporter Park Jihwan] Daishin Securities maintained a 'Buy' rating on DL E&C on the 13th, stating that the undervaluation phase has been resolved, and raised the target price by 29% from the previous level to 200,000 KRW.
Researcher Dongheon Lee of Daishin Securities said, "Q2 sales are expected to reach 2.0162 trillion KRW, up 19% from the previous quarter, and operating profit is expected to increase by 11% to 221 billion KRW." This is 5% higher in sales and 4% higher in operating profit compared to market expectations. Sales are on an upward trend reflecting increased construction starts since 2018, and operating profit is improving due to sales growth, cost reduction, and increased settlement of subcontracting volumes.
Housing starts in the first half of the year reached about 10,000 units, half of the annual target of 20,000 units. New orders are sluggish at about 3.2 trillion KRW in the first half, out of the annual target of 11.5 trillion KRW. However, considering the visibility of targeted volumes and the tendency for annual volumes to concentrate in the second half, this is seen as an achievable level.
In particular, it is analyzed that the company will fully enter the phase of resolving undervaluation. Researcher Lee said, "Orders in 2019 were 7.9 trillion KRW, but last year's orders recovered to 10 trillion KRW," adding, "Especially, performance improvement is expected to continue from Q2 onward."
He added, "The company focused on the construction industry after the split from a conservative business strategy as a conglomerate," and "considering the net cash position (cash equivalents of 2.4 trillion KRW, borrowings of 900 billion KRW) and price-to-book ratio (PBR) of 0.7 times, the stock price is undervalued."
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