[Click eStock] "Hyundai Construction Target Price 43,000 KRW... Maintains Top Industry Preference"

NH Investment & Securities maintained a target price of 43,000 KRW and a buy rating for Hyundai Engineering & Construction. This is because there is no change in the company's strategic direction in terms of reconstruction orders and business diversification.

On the 2nd, Hyundai Engineering & Construction was finally selected as the contractor for the Shinbanpo 2nd reconstruction project (2,056 households, construction cost of 1.3 trillion KRW). The next areas of interest are Hannam 4 District (2,331 households, construction cost of 1.6 trillion KRW) and Apgujeong 3 District (5,800 households, cost not yet determined). The potential gross profit from these three sites is estimated at 220 billion KRW annually (assuming a construction period of 3 years and a GPM of 10%). Eun-sang Lee, a researcher at NH Investment & Securities, said, "Hyundai Engineering & Construction's D·H brand and track record will stand out in the order-winning competitiveness."

Construction has also begun in earnest for investment and development projects such as the CJ Gayang-dong Research Center (construction cost of 2 trillion KRW) and the Hilton Hotel complex development (construction cost of 1.1 trillion KRW). The expected gross profit margin is around 15%, with the contribution to performance expected to increase in 2026. Business diversification into data centers and nuclear power plants is also underway.

From the beginning of this year through October, new construction starts totaled 65 million square meters. Although showing signs of recovery, this is still about 70% of the average construction start area of 92 million square meters from 2010 to 2023. While gradual interest rate cuts and increases in new construction starts will lead to gradual improvements in cost ratios in the construction sector, it is judged that it will be difficult to distinguish the speed of cost ratio improvement among companies until a meaningful rebound in new construction starts occurs. The researcher said, "Rather than immediate cost ratio improvements, it is necessary to focus on companies' order-winning competitiveness and efforts to explore new businesses," adding, "We maintain our top pick view within the sector."