[Click eStock] "DL E&C, Rising Expectations for SMR Standardization Benefits"

Long-standing Collaboration with Leading US SMR Company X-energy
Continuous Benefits Expected if SMR Standardization Is Achieved

There is an analysis that DL E&C, which had been experiencing poor performance due to the housing market downturn and overly passive management, now has the potential to gain new attention in the stock market. This is due to its potential to create new industry standards by collaborating with the US company X-energy in the Small Modular Reactor (SMR) business.

On the 10th, KB Securities raised DL E&C's target stock price by 18.9% to 63,000 KRW and maintained a 'Buy' rating, citing this background. The previous closing price was 44,100 KRW.

The main reason is the growth potential of the SMR industry. KB Securities judged that success in the SMR industry depends more on recognition of standard technology than on simple sales or order performance. DL E&C’s US partner, X-energy, is receiving support from the US Department of Energy (DOE) for its next-generation reactor demonstration program (ARDP) through the high-temperature gas reactor (HTGR)-based Xe-100 project. It has secured a diverse project pipeline by collaborating with companies such as Dow Chemical and Amazon. This increases the likelihood that X-energy will establish itself as the standard technology among 4th generation SMR technologies.

DL E&C has been cooperating from the early stages as an EPC (Engineering, Procurement, and Construction) partner of X-energy. In January 2023, it invested 20 million USD to acquire convertible bonds of X-energy and is jointly promoting SMR EPC projects in countries such as Norway and Indonesia. It is expected that beyond the simple possibility of future orders, DL E&C will receive continuous benefits in subsequent projects if SMR standardization progresses.

Kang Min-chang, a researcher at KB Securities, said, "Considering DL E&C’s current market capitalization of 1.7 trillion KRW, net cash of 1 trillion KRW, and this year’s operating profit forecast (guidance) of 520 billion KRW, the potential benefits from SMR standardization have hardly been reflected in the corporate value." He added, "Investment in DL E&C can be seen as an opportunity to buy a free call option on SMR standardization."