[Click e Stocks] Hyundai Construction, Q3 Earnings Disappoint... Target Price Downward Adjustment

Yuanta Securities on the 23rd lowered the target price for Hyundai Construction by 18% to 42,000 KRW, reflecting a reduction in return on equity (ROE). The investment rating was maintained at 'Buy.'

Jang Yoon-seok, a researcher at Yuanta Securities, stated in a report released that day, "Despite external growth, frequent cost factors have prevented profit growth," and added, "There are many expected factors such as self-operated projects, investment development projects, and nuclear power that can secure implementation and construction profits, but it is still too early for these variables to contribute to performance."

Hyundai Construction's third-quarter sales increased by 5% year-on-year to 8.3 trillion KRW, while operating profit for the same period decreased by 53% to 114.3 billion KRW. The operating profit was 17% below consensus.

Researcher Jang explained, "Although sales have maintained year-on-year growth for 10 consecutive quarters, additional costs of about 70 billion KRW reflected in the Saudi Marjan development project and additional cost settlements at housing completion sites resulted in a sustained operating profit margin in the 1% range. Regarding pre-tax profit, despite recognizing a settlement gain of 32.5 billion KRW from the Seoul-Chuncheon Expressway fund, there was an evaluation loss due to exchange rate decline."

He added, "For valuation recovery, it is necessary to confirm that the reflection of additional costs, which have been continuously occurring not only in domestic sites but also in overseas projects, has ended."

Yuanta Securities forecasted that Hyundai Construction's profitability would be difficult to improve in the short term.

Researcher Jang said, "The additional cost settlements at completed sites and housing quality costs reflected in the previous quarter continue, and unexpected deterioration factors in overseas project cost ratios have recurred, making the visibility of short-term profitability improvement unclear."

Furthermore, considering that the proportion of housing sales from projects started before 2023, which is currently a burden on profitability, is estimated to be 76% in 2024 → 43% in 2025 → 15% in 2026, he viewed that the speed of profit recovery also appears relatively slow, requiring a conservative approach.