[Click eStock] DL E&C, Increasingly Attractive Points Emerging

[Asia Economy Reporter Lee Seon-ae] NH Investment & Securities announced on the 15th that it maintains a Buy rating and a target price of 230,000 KRW for DL E&C, considering it a second-preferred stock within the construction sector.

Minjae Lee, a researcher at NH Investment & Securities, stated, "Orders from public and private developers, which are more profitable than typical urban redevelopment or subcontracting projects, are expanding. The eco-friendly CCUS projects have been completed or are underway with Daesan Power, Hyundai Oilbank, and power generation subsidiaries," adding, "Even considering the valuation dilution effect caused by DL Construction, there remains an undervaluation appeal with a price-to-earnings ratio (PER) around 5 times compared to large construction companies."

DL E&C is expanding its public and private development projects. Of the 1.2 trillion KRW order target for the developer division this year, 1.0 trillion KRW was already achieved in the third quarter. Notably, the public-to-private ratio is 70% to 30%, indicating sufficient mid- to long-term growth potential. For reference, since some profits from the developer are shared, the cost ratio tends to be low. Additionally, in August this year, DL E&C planned a carbon capture, utilization, and storage (CCUS) project together with Daesan Power and Hyundai Oilbank. Having prior CCS EPC experience with Korea Midland Power in 2013, the company is expected to grow into a firm with annual CCUS EPC experience of around 1 million tons through additional projects.

On a consolidated basis, third-quarter sales are estimated at 1.9 trillion KRW (+3% quarter-on-quarter), and operating profit at 204.9 billion KRW (-11% quarter-on-quarter), in line with consensus. On a separate basis, housing sales reached 11,000 units, and although more than 9,000 units need to be sold in the fourth quarter, achieving over 20,000 units annually against the target of 21,000 units is expected to be manageable. Third-quarter new orders on a separate basis amounted to 4.2 trillion KRW, somewhat sluggish compared to the annual target of 8.5 trillion KRW, but considering negotiated contracts and other factors, meeting the target does not seem difficult.