[Click eStock] "GS Geonseol Completes Cost Rate Adjustment... Recommends Bottom Split Buying"

[Asia Economy Reporter Hwang Yoon-joo] Hi Investment & Securities evaluated on the 31st that GS Construction's cost ratio adjustment due to rising raw material prices was completed in the fourth quarter of last year. They also believe that all the negative factors from the real estate sector have been reflected, maintaining a 'Buy' investment rating and a target price of 35,000 KRW.

Researcher Bae Se-ho of Hi Investment & Securities stated, "The sales revenue for 2023 is projected to increase by 9.8% year-on-year to 13.2 trillion KRW."

Researcher Bae explained, "This reflects growth in the construction and housing sectors due to increased pre-sale volumes, as well as growth in new business sectors such as GS Inima." GS Construction projected sales revenue for 2023 of 9.72 trillion KRW in the construction/housing sector and 1.66 trillion KRW in the new business sector.

The 2023 new order guidance is set at 14.5 trillion KRW, consisting of 9.5 trillion KRW domestically and 5 trillion KRW overseas.

Researcher Bae analyzed, "The domestic order target is 4.2 trillion KRW lower than the actual orders of the previous year, reflecting a decrease in housing sector orders due to the downturn in the real estate market." He added, "The overseas order target plans an increase of 2.7 trillion KRW compared to the previous year's actual orders, with 3.5 trillion KRW of this coming from the new business sector, particularly planning 2.5 trillion KRW in new orders for GS Inima."

The 2023 pre-sale target is 19,881 units, which is 8,120 units fewer than 2022's 28,003 units. This consists of 10,826 units from redevelopment projects, 8,512 units from general contracting, and 543 units from self-developed projects.

In particular, the previously concerning refinancing risk of real estate project financing (PF) is expected to continuously decrease due to the end of Korea's interest rate hike trend and government support programs (PF ABCP purchase program, HUG PF guarantees, etc.). The real estate market is also expected to rebound in the second half of 2023 alongside expectations of interest rate cuts.

Researcher Bae stated, "GS Construction's current stock price appears to have already reflected all the negative factors from the real estate sector," and predicted, "Going forward, it will respond significantly to rebounds in real estate indicators such as apartment sale prices and government easing of real estate regulations." He added, "Considering the current stock price near the bottom, a phased buying strategy is recommended."