[Click eStock] "Housing Construction Big Cycle Begins... Panel Oligopoly Kumkang Industrial Benefits"

[Asia Economy Reporter Ji Yeon-jin] Hana Financial Investment announced on the 30th that it expects Kumkang Industrial to benefit from the 'big cycle' of a significant increase in real estate construction starts, recommending a buy rating and a target price of 15,700 KRW. The target price was calculated by applying a price-to-earnings ratio (PER) of 15.8 times, which corresponds to the early phase of the real estate construction big cycle from 2014 to 2017, to this year's expected earnings per share (EPS).

Kumkang Industrial holds a 28% market share in the panel form market, an essential material for construction foundations and civil engineering works, operating as an oligopoly, and is gaining attention as a momentum driver due to policies expanding real estate supply.

Researcher Choi explained that the construction permits and construction start areas, leading and coincident indicators of construction in 2020 and 2021, increased by 2.1% and 17.6% respectively compared to the previous year, marking the beginning of a significant upward trend. He stated, "The rental utilization rate and rental price per square meter of panels are expected to rise to levels seen during past big cycles (utilization rate 85%, rental price 60,000 KRW per ㎡), forecasting explosive growth in quantity (Q) and rental margin (M). Construction material companies' stock prices have surged up to a PER of 20 times during past cycles solely on the momentum of increased construction starts, but Kumkang Industrial's expected PER for this year is 9.8 times, indicating it remains undervalued."

Sales in the panel segment this year are projected to increase by 49.3% year-on-year to 283.2 billion KRW, with operating profit soaring by 241.4% to 21 billion KRW. The order backlog stood at 67.6 billion KRW at the end of last year, an 81.6% increase from the previous year, suggesting the start of a boom period. This year, the order backlog is expected to grow to 74.2 billion KRW due to government policies expanding private-led housing supply.

The rental utilization rate of panels has increased by more than 2% monthly since early last year, growing from about 60% at the beginning of last year to around 80% at the start of this year, making production expansion inevitable. This indicates a boom driven by unprecedented supply shortages.

This year's expected sales are projected to increase by 25.5% year-on-year to 715.7 billion KRW, and operating profit is expected to rise by 76.8% to 45.8 billion KRW. Researcher Choi explained, "This is attributed to structural growth in the panel segment due to the real estate construction big cycle, margin improvement in the steel pipe segment from price increases, and growth in the ship engine segment due to a boom in domestic shipbuilding orders," adding, "This is why we strongly recommend buying."