[Click eStock] "IS Dongseo, Target Price Maintained at 40,000 Won"

Ebest Investment & Securities announced on the 23rd that it maintains a target price of 40,000 KRW and a buy rating for IS Dongseo.

IS Dongseo's first-quarter sales amounted to 413.1 billion KRW, a 23.9% decrease compared to the same period last year. This figure exceeded the consensus by 17.6%. Operating profit was 79.7 billion KRW, down 10.2% year-on-year. The main reason for the strong performance was the construction division, where the contract site with equity participation at Daegu Jukjeon Station reflected an increase in construction costs of 52.1 billion KRW as revenue without cost, causing contract margins to surge. As a result, the contract margin temporarily recorded a high level of 40.9%. The company's own site, including Goyang Deok-eun DMC blocks 8 to 10, also recorded an excellent GPM of 40.7%. Researcher Kim Seryeon of Ebest Investment & Securities analyzed, "Unlike peer companies whose fundamentals are deteriorating due to delays in construction cost escalation caused by high building material price increases, expanded unsold risk, and increased interest expenses from PF off-balance sheet debt assumption, IS Dongseo's performance is differentiated," adding, "Considering that the average construction GPM is around 5-9%, IS Dongseo's profit resilience as a developer has been reconfirmed."

It is true that the two major business sectors of IS Dongseo, the construction division and the used battery sector, are likely to find it difficult to gain stock price momentum in the near term due to recent industry slowdowns. However, IS Dongseo's core land bank, the Jungsan District in Gyeongsan City, Gyeongbuk Province, is completing the price reduction process and is scheduled to start full-scale business in the second half of 2025. The total sales scale is estimated at 3.5 trillion KRW. Considering the stock price surge following the successful development of W in Yongho-dong, Busan, valuation rerating will be confirmed upon project success. Although it depends on the sale price, net profit from the Jungsan District in Gyeongsan is estimated to be at least 500 billion KRW at this point. The used battery sector is also positively evaluated for laying the foundation for overseas growth through the expansion of the BTS new plant in Poland, securing additional expansion sites in Europe, and exploring sites for entry into the U.S. market.