[Click eStock] "Hyundai Construction, Clear Performance Improvement This Year... Top Pick in Construction Sector"

[Asia Economy Reporter Ji Yeon-jin] Yuanta Securities maintained a buy rating and a target price of 70,000 KRW for Hyundai Construction, and reaffirmed it as the top preferred stock in the construction sector on the 12th.

Researcher Kim Ki-ryong of Yuanta Securities stated, "Recently, the stock price of the company was negatively affected by the Hyundai Engineering IPO event due to the structure of the owner's existing share sales and supply-demand concerns. However, considering the expansion of housing sales and overseas orders based on Hyundai Construction's standalone performance this year and clear earnings improvement, there is no need to reflect excessive disappointment." He added, "The performance of the offshore wind EPC (Engineering, Procurement, Construction) and operation business utilizing the subsidiary Hyundai Steel Industry is expected to become more concrete in terms of timing within the new business."

Hyundai Construction's consolidated sales in the fourth quarter of last year are estimated to have increased by 19.8% year-on-year to 5.18 trillion KRW, and operating profit is expected to rise by 123.6% to 201.1 billion KRW. The positive effect of the reversal related to the 80.9 billion KRW Singapore Marina South bond call cost reflected in the second quarter of last year (estimated at about 70%) is favorable, but the profit improvement effect is expected to be limited due to the write-down of unbilled construction work in some overseas projects.

Researcher Kim said, "Due to the base effect from additional costs (90 billion KRW) reflected in the fourth quarter of 2020 in Qatar and Kuwait, the year-on-year operating profit improvement is expected to expand," adding, "Along with the sales increase trend across all construction types, the contribution of large overseas sites such as Saudi Jafurah, Qatar Lusail architecture, and Panama Metro, which have already been ordered, will expand, and overseas sales on a standalone basis are expected to exceed 1 trillion KRW per quarter."

Hyundai Construction's domestic housing sales performance (standalone basis) last year was about 27,000 units due to delayed sales in the fourth quarter, achieving about 85% of the guidance. Considering the delayed sales effect of about 14,000 units last year, it is expected that sales performance will exceed 30,000 units this year.