[Click e-Stock] "Hyundai Engineering & Construction Expected to See Gradual Stock Price Uptrend... Target Price Raised"

Target Price Raised by 20.8% Compared to Previous Level

On April 30, LS Securities reported that Hyundai Engineering & Construction has demonstrated improved earnings fundamentals, and accordingly raised its target price from 48,000 won to 58,000 won. The investment opinion was maintained at 'Buy'.

Kim Saeryeon, an analyst at LS Securities, explained, "After the big bath (large-scale loss recognition) in the fourth quarter of last year, we had maintained conservative assumptions in our estimates due to concerns about earnings visibility. However, as the first quarter of this year has clearly demonstrated improved fundamentals, we have raised our overall earnings expectations."

In the first quarter, Hyundai Engineering & Construction posted sales of 7.456 trillion won, down 12.8% year-on-year, and operating profit of 213.7 billion won, down 14.8%. Kim noted, "While sales were in line with the consensus (average of brokerage forecasts), operating profit exceeded both the consensus of 190.5 billion won and our estimate of 180 billion won by about 12%, delivering strong results. Overall, margin improvement was evident, and in particular, Hyundai Engineering led the earnings improvement as inventory at problematic regional sites decreased, the mix at newly launched sites improved rapidly, and stable overseas margins continued thanks to captive (affiliate) projects within the group." She added, "This result is significant in that both Hyundai Engineering & Construction and Hyundai Engineering have dramatically reaffirmed their improved earnings fundamentals to the market after reflecting large losses in the previous fourth quarter."

The stock price is expected to follow a gradual upward trend. Kim commented, "In addition to this year's earnings turnaround, the signing of the Kozloduy nuclear power plant construction contract in Bulgaria at the end of the year, and the sequential realization of domestic quasi-self-development projects, have secured growth drivers that differentiate the company from its peers. This year, the company is expected to strengthen its fundamentals, and next year, by diversifying its business portfolio through large-scale nuclear power plants, small modular reactors (SMR), and domestic quasi-self-development projects, it is anticipated to show a gradual upward trend in its stock price befitting a sector first mover."