[Click eStock] "DL E&C Approaching Target Price... Investment Opinion Neutral"

Hana Securities downgraded its investment opinion on DL E&C from "buy" to "neutral" on the 2nd, stating that "the stock price has reached the target price due to the rise in share price." The target price was maintained at 45,000 KRW. The closing price on the previous day was 43,100 KRW.

Securities company app, stock trading scene. Photo by Hyunmin Kim kimhyun81@

On the same day, Seungjun Kim, a researcher at Hana Securities, stated, "DL E&C's Q4 performance last year recorded sales of 2.3 trillion KRW and an operating profit of 88.8 billion KRW. Sales increased by 3.6% year-on-year, while operating profit decreased by 26.1%, falling short of market expectations."

The reason for the weak operating profit was attributed to an overly optimistic profit margin estimate in the plant division and an increase in the cost ratio in DL Construction's civil engineering division. As the sales proportion of the domestic plant division increased, the margin mix was not as favorable as expected. Non-operating losses included a foreign exchange loss of 28 billion KRW and an investment valuation loss of 38 billion KRW. The number of housing units started last year was 3,601 units for DL E&C and 2,527 units for DL Construction.

Regarding this year's performance outlook, DL E&C projected a consolidated sales increase of 11.3% and an operating profit increase of 44.1% compared to last year. Researcher Kim explained, "Housing sales are expected to decrease by 2.3% year-on-year, but plant sales will increase by 109.9%. The reason for the large increase in operating profit relative to sales is attributed to an improvement in the cost ratio in the housing division. It means that costs can be improved through additional increases." The number of housing units started is expected to rise to 10,060 units for DL E&C and 7,700 units for DL Construction, increasing by 179.4% and 204.7% respectively compared to the previous year. This includes about 5,000 units of deferred volume from last year for DL E&C.

Attention should also be paid to the shareholder return policy announced for this year through 2026. The existing shareholder return plan includes purchasing treasury shares equivalent to 10% of net income. However, this does not imply a treasury stock buyback with cancellation. Researcher Kim added, "There is room for upward revision of the target price depending on confirmation of plans for treasury stock cancellation, expansion of cash dividends, margin improvement, specific plans to improve return on equity (ROE), and changes in the real estate market."