[Click eStock] "GS Geonseol, Margin Improvement Expected... Target Price 15,000 → 19,000"

Q3 Revenue Expected at 3.2 Trillion KRW
Housing Construction Profit Margin Meets Company Targets
Future Margin Recovery and Sales Increase Are Key

Hana Securities on the 10th raised the target price for GS Construction from 15,000 KRW to 19,000 KRW, a 26.7% increase, citing expectations of gradual margin improvement. The investment rating 'Neutral' was maintained. GS Construction's closing price on the previous trading day was 18,660 KRW.

Researchers Seungjun Kim and Minho Ha of Hana Securities stated, "The estimated Q3 performance is expected to be sales of 3.2 trillion KRW (+3.5% YoY) and operating profit of 81.9 billion KRW (+36.6% YoY)." They added, "The gross profit margin (GPM) for housing construction is estimated at 7%, plant at 4%, infrastructure at 7%, and new business at 14%. The housing construction margin was estimated in line with the company's indicated margin level of 6-8%."

During Q3, pre-sales are expected to reach approximately 4,000 units. The cumulative pre-sales volume is projected to be about 12,600 units. Orders received are estimated at 3.3 trillion KRW, with housing construction and new business each accounting for 1.5 trillion KRW. The order backlog is expected to be 56.5 trillion KRW (housing construction accounts for 30.7 trillion KRW). The new business segment includes an order worth 1 trillion KRW related to Inima sewage treatment.

Currently, GS Construction has about 70 ongoing construction sites. The number of sites started from 2021 to 2024 is identified as 15, 30, 17, and 10 respectively. Among these, 10 sites are scheduled to be completed within this year, and 30 sites are expected to be finished next year. As the completion of sites started during the construction cost increase period of 2021-2022 is scheduled for next year, the margin mix for housing is expected to improve.

Researchers Seungjun Kim and Minho Ha said, "The target price was calculated by applying a target price-to-earnings ratio (Target P/E) of 6.5 times to the estimated 2024 earnings per share (EPS)." They added, "The industry still shows signs of improvement, and a more definite recovery is expected in the second half of next year." They also noted, "There is a possibility of adjusting the investment rating and target price depending on the degree of future margin recovery and the increase in pre-sales."