[Click eStock] "Hyundai Engineering & Construction: Focus on Nuclear Power Plant Momentum... Target Price Up"

Target Price Raised by 15% Compared to Previous Estimate

On May 21, NH Investment & Securities stated that it is important to pay attention to the nuclear power plant momentum for Hyundai Engineering & Construction, and raised its target price from 52,000 won to 60,000 won. The investment opinion remains 'Buy'.

Lee Eunsang, a researcher at NH Investment & Securities, said, "We raised the target price by 15% compared to the previous figure. This is due to a change in the estimation period applied in calculating the target price, and a reduction in the net asset value (NAV) discount rate." He explained, "The estimation period has been changed to the third quarter of 2025 through the second quarter of 2026, and the NAV discount rate has been reduced from the previous 30% to 20%." He continued, "Previously, a 30% discount rate was applied considering the inevitability of unsold units at regional housing sites scheduled for completion this year. However, taking into account the government's willingness to support unsold apartments in regional areas and Hyundai Engineering & Construction's stable management of unsold units, we have applied a reduced discount rate."

Hyundai Engineering & Construction's unsold units are being managed stably. Lee stated, "The number of unsold units at Hyundai Engineering & Construction decreased from 4,439 at the end of 2024 to 3,057 in the first quarter of this year." He added, "Unsold units after completion in the first quarter amounted to about 600. While it is necessary to monitor the trend for the remaining quarters, this is only about 3% of the five-year average annual supply of 21,000 units, which is a manageable level of risk."

This year, performance in orders from other segments and momentum in new businesses are expected to be important. Lee analyzed, "Although there will be continued improvement in external conditions in the second half of the year, such as housing price recovery, interest rate cuts, and fiscal spending, there is a time lag before this leads to an increase in housing orders. This is why performance in orders from other segments and new business momentum are important this year." He added, "Hyundai Engineering & Construction is expected to easily achieve its order guidance for this year through the commencement of investment development projects such as the Hilton Hotel and the CJ Gayang-dong site. In addition, the main contract for the Bulgarian nuclear power plant and the start of construction for the Palisades Small Modular Reactor (SMR) are scheduled for the end of this year, so momentum related to nuclear power plants is also positive."

Profit improvement is expected to stand out compared to competitors. Lee said, "The growth rate of supply volume in 2024 compared to 2023 is a high 88% compared to competitors, so profit improvement will also be the most pronounced."