Shinhan Investment Corp. maintained its target price of 15,000 KRW and a 'Trading BUY' rating on GS Construction on the 12th, expecting a solid first-quarter performance due to proactive cost handling.
Researcher Kim Sun-mi stated, "A solid first-quarter performance is expected following proactive cost handling," adding, "Sales and operating profit are forecasted at 3.2 trillion KRW and 58.2 billion KRW, respectively, which are reasonable levels."
She analyzed, "Although the operating profit is about 10% lower than the consensus, the absolute amount does not represent a significant difference," and noted, "Housing sales remain steady while the cost ratio maintained the previous year's annual average level."
She further explained, "Due to adjustments in the estimated cost ratio at major sites in the fourth quarter of last year and proactive cost reflection, one-time expenses in the first quarter of this year are expected to be minimal," and added, "New orders in the first quarter amounted to 3.4 trillion KRW, which is similar to the previous year excluding the 1.5 trillion KRW Saudi Fadhili gas field project."
Continuing, she said, "Newly supplied units totaled 2,833, accounting for 12% of the annual target," and pointed out, "The profitability of new sites is estimated to be about 5 percentage points higher than existing sites, which is expected to create a virtuous cycle of ‘increased construction starts → increased sales → improved profitability.’" However, she noted that considering the execution cost ratio is applied about one year after construction starts, profitability improvement is expected to be confirmed after 2025.
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