[Click eStock] "Hyundai Construction, Beneficiary of Building Regulation Easing"

[Asia Economy Reporter Ji Yeon-jin] Kiwoom Securities announced on the 14th that it recommends a buy rating and a target price of 66,000 KRW for Hyundai Engineering & Construction, considering this year's favorable order environment, domestic and overseas sales growth, and the full-scale launch of new businesses.

Researcher Cho Young-hwan of Kiwoom Securities stated, "With a relatively favorable government for maintenance projects (redevelopment and reconstruction, etc.) set to be inaugurated this year, Hyundai Engineering & Construction's strong competitiveness in housing maintenance project orders is likely to have a positive effect," adding, "The gradual easing of major reconstruction regulations such as the Reconstruction Excess Profit Recovery System and changes in safety inspection standards is expected to be positive."

Hyundai Engineering & Construction's consolidated sales for the first quarter of this year are expected to increase by 10.3% year-on-year to 4.6 trillion KRW, while operating profit is forecasted to decrease by 6.2% to 188.4 billion KRW. This is below market consensus. Due to the sharp rise in raw material prices that began last year, profitability is expected to decline somewhat, leading to a decrease in operating profit.

However, the fact that both domestic and overseas sales are expected to grow this year is viewed positively. The number of housing units sold (separate basis) increased by 56% compared to 2020, and grew by 36% last year, indicating steady housing sales growth. Meanwhile, large-scale projects such as Saudi Majan, Qatar Lusail Plaza, and Iraq Basra Refinery are being fully launched, increasing their contribution to sales.

Researcher Cho said, "Despite the impact of rising raw material prices, the company's annual operating profit is expected to increase by 12% year-on-year," and added, "Concerns about 'double counting' have somewhat eased following the cancellation of the listing of the subsidiary Hyundai Engineering earlier this year."