[Click eStock] GS Construction, Overseas Orders Performance as a Factor in Defending Plant Sales Gap

[Asia Economy Reporter Lee Seon-ae] Yuanta Securities announced on the 14th that it maintains a Buy rating and a target price of 57,000 KRW for GS Construction.

GS Construction is expanding its business areas through last year's acquisition of overseas module companies (Danwood, Elements) and entry into the Precast Concrete business (GPC). Recently, the results of various new businesses centered on construction and environment, such as the secondary battery recycling business (Enerma) that has started construction, data center business operations, and Vietnam development projects, are expected to gradually materialize. The timing of the KOSPI listing of its subsidiary GS Inima, originally targeted for the first half of 2022, is understood to be delayed due to difficulties in due diligence caused by COVID-19.

The cumulative housing sales performance for the third quarter of 2021 was about 17,000 units, achieving approximately 55% of the guidance. Although delays in the sales timing of some redevelopment projects are negative, it is understood that sales results of more than about 8,000 units will be recorded in October. If the 2021 sales guidance is not significantly missed, the trend of performance improvement in the housing/construction sector following housing sales is expected to remain valid.

GS Construction's consolidated results for the third quarter are estimated to meet current market expectations with sales of 2.33 trillion KRW (+0.7% YoY) and operating profit of 223.1 billion KRW (+6.6% YoY). Housing and construction sales in the first half of 2021 decreased compared to the same period last year, but are expected to turn to an upward trend this quarter.

Researcher Kim Ki-ryong of Yuanta Securities explained, "While sales growth in new businesses (overseas modules, GS Inima) is positive, the decrease in plant sales due to the completion of large affiliates' (LG Chem, GS Caltex) projects and the absence of new orders is expected to be a short-term burden on performance," adding, "Operating profit this quarter is estimated to increase by 79% compared to the previous quarter due to the disappearance of the Singapore bond call cost issue (53.7 billion KRW) in the second quarter."