[Click eStock] "HDC Hyundai Development Company, Stock Price Will Recover Once Earnings Improvement Becomes Visible"

Q3 Gwangwoon University Station Area Project as a Key Point
Q1 Operating Profit Expected to Increase 4.2% YoY
Annual Supply Likely to Reach 13,000 Households

Shinhan Investment Corp. analyzed on the 12th that HDC Hyundai Development Company could regain a stable stock price trend with improved earnings. They maintained a 'Buy' investment rating and a target price of 20,000 KRW. The closing price of HDC Hyundai Development Company on the previous trading day was 17,270 KRW.

Researchers Sunmi Kim and Jiwoo Lee of Shinhan Investment Corp. stated, "As a pure housing company, especially one focused on self-operated projects that are significantly affected by macro factors, stock price volatility may increase for the time being depending on interest rates, government real estate policy stances, and the pace of housing market regulation easing." They added, "However, with the commencement of the Gwangwoon University Station area project in the third quarter, we expect a visible improvement in earnings, which should help regain a stable stock price trend." The stock price of HDC Hyundai Development Company has declined by 4.5% over the past month, underperforming within the sector. This is attributed to fatigue from the stock price rise since the fourth quarter of 2023, housing market uncertainties, and disappointment over delayed interest rate cuts.

First-quarter sales and operating profit are expected to be 957 billion KRW and 52.2 billion KRW respectively, representing solid results in line with consensus (market average forecast) based on operating profit. Although sales are projected to decrease by 11.0% year-on-year due to a high base from the one-time recognition of profits from the Cheongju Gagyeong 5 self-operated project, operating profit is expected to increase by 4.2% due to improved profitability across all business lines. New housing units supplied in the first quarter totaled 2,211, representing 16.5% of the annual target. The sales rate across all sites is favorable, and if the current plan proceeds as scheduled, an annual supply of 13,400 units is expected.

The Gwangwoon University Station area development project, with a project cost of 4.5 trillion KRW and high market interest, is scheduled to commence construction in September and begin sales in October. Although it is a self-operated project sensitive to sales prices and sales rates, considering the possibility of interest rate cuts in the second half of the year, project progress with self-held cash, and the status of architectural reviews, the likelihood of further delays at the sales stage appears low. Sales from the self-operated segment of the Gwangwoon University development project are estimated at approximately 2.8 trillion KRW. Researchers Sunmi Kim and Jiwoo Lee said, "With a gross profit margin (GPM) exceeding 20%, it is expected to drive earnings growth in 2025." They added, "However, for the commercial facilities and two apartment buildings planned for lease operation (with total construction costs of 1.6 trillion KRW), revenue recognition will vary depending on the leasing entity, and related earnings adjustments are expected to be reflected in the second to third quarters when the business method is finalized."