[Click e Stocks] "HDC Hyundai Development Company, Target Price 25,000 Won"

Daishin Securities on the 29th newly set the target price for HDC Hyundai Development Company at 25,000 KRW.

The target price of 25,000 KRW applies a target PBR of 0.53 times to the 2024 BPS of 48,288 KRW. This reflects the uncertainty in the sales market due to the downturn in the domestic housing market.

Hyundai Development Company has traditionally had a high proportion of self-developed projects among domestic comprehensive construction companies, but profitability has declined compared to the past as the proportion of contract projects expanded during the housing market downturn. However, it is a stock that shows a differentiated upward trend even in a phase where construction stocks are neglected.

In 2023, through successful sales performance (11,566 units) and conversion to main PF, the scale of unstarted PF contingent liabilities is being stably managed at around 450 billion KRW (contract 350 billion KRW, maintenance 100 billion KRW). The remaining projects are also in the Cheonan area, where sales feasibility is favorable.

Due to a decrease in net borrowings in 2023, the debt ratio on a separate basis has decreased to around 120%, improving financial soundness. This is expected to be a solid support for carrying out large-scale self-development projects expected to start construction from 2024 to 2026.

The backlog of self-developed projects stood at about 10.5 trillion KRW as of the end of 2023. In August this year, a 4.5 trillion KRW Gwangwoon University station area project is scheduled to begin construction. Due to the change in accounting standards for recognizing sales of self-developed projects (from delivery to progress), sales growth is expected to start from this year.

Researcher Lee Taehwan of Daishin Securities said, "Despite the uncertain domestic housing market conditions, the mid- to long-term profit growth potential is high and the valuation burden remains low," adding, "It will be a stock that can be comfortably held at any point in the first or second half of the year." However, he added that it is necessary to observe the progress of lawsuits and this year’s sales rate.