[Click eStock] "GS Geonseol, 2Q Operating Profit Estimated Below Consensus... Overseas Risks"

[Asia Economy Reporter Lee Jung-yoon] Ebest Investment & Securities downgraded the target price of GS Engineering & Construction from 60,000 KRW to 48,000 KRW on the 4th, considering the expansion of overseas uncertainties and interest rate hikes. However, the buy rating was maintained.

GS Engineering & Construction's sales in the second quarter of this year are expected to reach 2.6608 trillion KRW, a 19.2% increase compared to the same period last year, in line with consensus estimates. Operating profit is estimated at 161.1 billion KRW, a 29.0% increase, but 27.5% below consensus.

This operating profit estimate reflects the possibility of increased risk of additional cost recognition due to COVID-19 at certain overseas plant sites in the second quarter. For housing, it is assumed that the sequential confirmation of estimated costs at uncertain sites will gradually enter a normalization phase.

Researcher Kim Se-ryeon of Ebest Investment & Securities explained, "It is regrettable that the possibility of overseas cost recognition increased during the housing normalization phase in the second quarter," adding, "The cumulative pre-sales in the first half are understood to be about 11,000 units, which is the level achieved according to GS Engineering & Construction's original plan. Therefore, despite demand contraction under high interest rates, the pre-sale performance is still favorable, which is encouraging."