Hyundai Construction Hits Jackpot with 6.5 Trillion Won Saudi Contract... Sales Reflected from Next Year

The Largest-Ever Project Secured by a Korean Company from Saudi Arabia
An Alternative to Fill the Gap in Declining Sales in the Construction and Housing Sector

Hyundai Engineering & Construction has landed a massive order worth 6.5 trillion KRW from Saudi Arabia. This is the largest project ever won by a Korean company from Saudi Arabia. After a period of stagnation due to a slump in the housing business, Hyundai Engineering & Construction's stock price showed an upward trend for the first time in a while.

According to the Korea Exchange on the 27th, Hyundai Engineering & Construction's stock price closed at 40,800 KRW, up 6.25% from the previous trading day. Early in the session, it even surged to 44,400 KRW. Hyundai Engineering & Construction preferred shares (Hyundai Engineering & Construction 우) rose close to the daily limit (30%) right after the market opened, hitting a 52-week high. However, the intraday gains narrowed, closing up 7.35% at 73,000 KRW. HD Hyundai Construction Equipment also rose as much as 23.65% intraday before closing up 3.40% at 73,000 KRW.

The project Hyundai Engineering & Construction won this time from Saudi Arabia is the construction of the Amiral Complex, a chemical plant producing ethylene, propylene, and other chemical products in the Jubail industrial complex in eastern Saudi Arabia. Hyundai Engineering will jointly execute the project. The client is SATORP, a joint venture between Saudi Arabia's state-owned oil company Aramco and the French company Total. The contract amount converted to Korean won is 6.5545 trillion KRW. This accounts for about 31% of Hyundai Engineering & Construction's annual sales last year, making it a mega-sized single order.

This is the first time Hyundai Engineering & Construction has secured overseas orders worth trillions of won this year. Kyungtae Kang, a researcher at Korea Investment & Securities, said, "The significance of this order is that it secured the growth engine for external expansion from next year onward in the first half of this year." He added, "Due to poor housing construction performance this year, sales in the architecture and housing sectors are expected to decline from next year, so an alternative is needed to fill this gap and sustain external growth. The plant construction order, which quickly generates progress payments, is like a blessing."

However, actual sales from this order are expected to be reflected after the first half of next year. Hyundai Engineering & Construction's annual performance this year is estimated to be about 25 trillion KRW in revenue and about 807 billion KRW in operating profit. While the overall construction sector's stock prices continue to underperform, this order is expected to lead to additional achievements such as the ongoing bidding for the Saudi NEOM City Spine Civil Box tunnel project and the Jafurah gas processing facility, which Aramco is issuing as a restricted bid.

Moonjun Jang, a researcher at KB Securities, said about Hyundai Engineering & Construction, "It is important to note that there were no significant project failures this year, and rather the pipeline of bids has increased." He added, "It is a company that will show the best order trend annually."