[Click eStock] "DL E&C, Industry-Leading Operating Profit Growth Rate Expected... Target Price Up"

Hyundai Motor Securities on the 4th raised the target price for DL E&C from 48,000 KRW to 48,000 KRW, maintaining a 'Buy' investment rating, stating that "this year, an industry-leading operating profit growth rate is expected."

Shin Dong-hyun, a researcher at Hyundai Motor Securities, said, "A solid profit outlook will be the biggest basis for the stock price increase." He forecasted that the annual operating profit this year will increase by 70.1% compared to the previous year.

Regarding the first-quarter performance, he stated, "On a consolidated basis, sales are estimated at 1.8518 trillion KRW, a 2.0% decrease compared to the same period last year, and operating profit is expected to increase by 27.7% to 77.7 billion KRW," adding, "Operating profit is expected to slightly underperform market consensus."

The first-quarter results are analyzed to reflect a temporary decline in profitability due to the concentration of high-cost site completions. Researcher Shin explained, "Sites that were sold during the past housing market boom have recently been completed, and the shortage of construction volume in 2023 has decreased, resulting in an approximately 16.9% decrease in housing segment sales compared to the same period last year," adding, "Accordingly, the gross profit margin (GPM) of the housing segment is estimated to be around 8%."

He continued, "This also means that low-profitability sites are being sequentially cleared," and added, "From the second quarter onward, the GPM of the housing segment is expected to gradually improve."

The plant segment is expected to continuously contribute to sales through the 'Shahin' project, the largest domestic petrochemical project to date. Although the project sales are expected to exceed 600 billion KRW, a conservative approach is being taken considering the somewhat low profitability.

In the first quarter, the construction volume was 3,800 units based on DL E&C alone and about 2,600 units for its subsidiary DL Construction, achieving more than half of the annual construction target. Researcher Shin evaluated, "Despite the off-season, many projects have started construction, laying the foundation for sales rebound and cost ratio decline."