[Click eStock] Daewoo Construction, Focus on Order Competitiveness in the Second Half of the Year

Meritz Securities Report

Meritz Securities maintained a Buy rating and a target price of 5,800 KRW for Daewoo Engineering & Construction on the 5th.

The company's consolidated operating profit for the first quarter is expected to decrease by 27.3% year-on-year to 160.9 billion KRW. This is expected to meet the market consensus of 161.4 billion KRW. Kyungwon Moon, a researcher at Meritz Securities, said, "Although the housing cost ratio, which worsened in the fourth quarter, slightly improved, the profit from the Vietnam THT development declined compared to the previous quarter, resulting in earnings that meet the lowered expectations overall."

The annual housing gross profit margin outlook is maintained at around 10%, the previous assumption, and is expected to gradually improve toward the second half of the year. Housing supply in the first quarter is expected to be about 2,500 units, lower than anticipated, but this is due to the deferred volume of some union members, so there should be no problem achieving the annual target.

The company succeeded in securing plant orders worth 1 trillion KRW and 700 billion KRW in Libya and Nigeria, respectively, in the first quarter, achieving more than 90% of the annual overseas order target. These orders were conducted through negotiated contracts, which are more profitable than other plant projects. The projects are expected to start contributing to sales from the second half of the year. Researcher Moon explained, "If the high profitability is confirmed in the numbers, it will act as a trigger for stock price increases," adding, "Additional civil engineering and plant orders are also expected in the second half, including the Al-Faw port and naval base in Iraq, and Shin Hanul Units 3 and 4."

Furthermore, Researcher Moon added, "Concerns surrounding the housing market, such as PF risk and worsening cost ratios, are expected to ease from the second half," and "News related to nuclear power plants in Poland and the Czech Republic is also positive for the stock price."