[Click eStock] "Earnings Momentum Building for Kumho Construction"

Stock Prices Flat but Strong Earnings Growth Confirmed... Undervaluation Highlighted

[Asia Economy Reporter Minwoo Lee] Kumho Construction continues to maintain its upward performance trend. While the stock price remains flat, the corporate value (valuation) is rising, leading to analyses that the stock is undervalued.

On the 24th, Ebest Investment & Securities maintained its 'Buy' rating and target price of 18,000 KRW for Kumho Construction, citing these factors. The closing price the previous day was 11,100 KRW.

This year's third-quarter results showed consolidated sales of 582.3 billion KRW and operating profit of 34.3 billion KRW, increases of 7.8% and 43.9% respectively compared to the same period last year. These figures generally met market consensus expectations. However, net profit reached 39.2 billion KRW, significantly exceeding the consensus of 24.9 billion KRW. Researcher Se-ryeon Kim of Ebest Investment & Securities explained, "This was due to recoveries from winning a compensation lawsuit related to the Korea Energy Agency (KEMCO) and the continued low corporate tax rate resulting from a claim for correction of previous years' losses."

Both sales and profit margins are expected to improve significantly going forward. Housing sales are also growing rapidly, and with the resulting improvement in cash flow, the debt ratio has decreased from 252.9% at the end of last year to 144.6%, nearly halving. Net borrowings are almost nonexistent, and Kumho Construction has received an investment-grade rating from Korea Ratings. The company’s own projects are scheduled to increase from 433 units last year to 2,264 units this year (including Uiwang Gocheon, Sejong, Daejeon Cheondong, etc.). Already, self-developed housing units such as Sejong 6-3, Hwaseong Dongtan A53BL, and Incheon Yongmaru 1BL, sold up to last month, total approximately 1,960 units.

Researcher Kim stated, "Ahead of the presidential election, construction stocks are generally stagnant, and Kumho Construction is showing a similar trend. However, while the stock price remains unchanged, the confirmation of high earnings growth has caused the valuation to drop sharply, creating an undervaluation merit."