[Click e-Stock] "HDC Hyundai Development Company Entering a Solid Earnings Cycle... Target Price Up"

Target Price Raised by 7.9% from Previous Level

On May 19, KB Securities announced that it expects HDC Hyundai Development Company to enter a solid earnings cycle and raised its target price from 31,500 won to 34,000 won. The investment opinion remains 'Buy'.

Jang Moonjoon, a researcher at KB Securities, explained, "The target price is set at 0.65 times the 12-month forward book value per share (BVPS), which is a 7.9% increase from the previous level, reflecting a decrease in the cost of equity due to a decline in the risk-free rate." He added, "Amid an uncertain macroeconomic environment, the company stands out for its differentiated investment appeal as it is entering a clear earnings cycle."

Most of the high-cost knowledge industry center projects, which had been the biggest obstacle to performance improvement, were completed in the first quarter, and the company is now expected to enter an earnings improvement cycle. Jang forecasted, "In 2025, HDC Hyundai Development Company's consolidated revenue is projected to decrease by 2.7% year-on-year to 4.14 trillion won, while operating profit is expected to increase by 59.3% to 294.1 billion won, marking the beginning of a full-fledged earnings improvement cycle." He added, "Although revenue from the construction and outsourced housing divisions is expected to decline, the increase in revenue from the company's own development business will offset this."

On May 16, the Seoul Metropolitan Government imposed administrative sanctions related to the Gwangju Hwajeong accident. Under the Framework Act on the Construction Industry, an eight-month business suspension was imposed, and under the Framework Act on Industrial Safety, a four-month business suspension was imposed. Jang stated, "As is customary, the company plans to immediately file for a stay of execution and an administrative litigation to cancel the sanctions. If the stay is granted, there will be no impact on orders or business activities until the litigation is concluded." He analyzed, "While the administrative sanctions themselves cannot be seen as positive, the uncertainty related to the issue, which has persisted for more than three years since January 2022, is now being largely resolved. This allows the company to fully focus on its earnings cycle, which is significant for the stock price."

He emphasized the need to focus on the trend of performance improvement. Jang noted, "The share price of HDC Hyundai Development Company has historically moved in line with the trend of revenue and margins from its own development business. Starting in 2025, revenue from self-developed projects, including Seoulwon I-Park, is expected to increase, and a rapid improvement in margins is also anticipated. The company is actively securing new sites for its own development business, which suggests that this earnings cycle could expand further. This underpins the potential for continued share price gains," he said.