[Stock of the Week] Hyundai Engineering & Construction Leads the "Nuclear Renaissance" with Strong Results and Soaring Share Price

Stock Price Surges 200% This Year
"More Sensitive to Nuclear Market Than Construction"
Global Shift Toward Nuclear, Led by Trump
Expectations for Overseas Nuclear and SMR Orders
Brokerages Raise Target Prices in Succession

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Hyundai Engineering & Construction, which has successfully transformed its image into that of a nuclear power company, is poised for strong performance as it rides the wave of increasing global demand for nuclear power. As the company continues to maintain its traditional dominance in the housing sector, it is expected to gain further momentum for future stock price growth.

On June 23, Hyundai Engineering & Construction closed at 75,500 won on the Korea Exchange, up 0.27% from the previous trading day. Considering that the stock was trading at 25,000 to 26,000 won at the beginning of the year, it has risen nearly 200% in just half a year. The stock, which had been gradually rising since the start of the year, surged sharply last month, jumping 56% in just one month. On June 17, it soared to an intraday high of 81,600 won, setting a new 52-week high.

A bird's-eye view of the large-scale AP1000 nuclear power plant jointly promoted by Hyundai Engineering & Construction and Westinghouse in the United States. Hyundai Engineering & Construction

Transforming into a Nuclear Power Company

The securities industry sees this upward trend in Hyundai Engineering & Construction’s stock price as evidence that the company has firmly established itself as a leading EPC (Engineering, Procurement, and Construction) player in the nuclear power sector. Jang Moonjun, a researcher at KB Securities, commented, “The recent trend in Hyundai Engineering & Construction’s stock price is in line with other leading domestic nuclear-related stocks such as Doosan Enerbility. The company now responds more sensitively to trends in the nuclear power industry than to the construction market, making traditional valuation metrics for domestic construction stocks less relevant.” He added that it is more appropriate to compare Hyundai Engineering & Construction to global EPC firms with nuclear experience, such as Vinci of France, AtkinsR?alis of Canada, and L&T of India.

Hyundai Engineering & Construction has positioned nuclear power as a key new growth strategy and is focusing on its development. In 2009, the company successfully completed three out of four units of the Barakah nuclear power plant in the United Arab Emirates, and has demonstrated its construction capabilities domestically by leading the construction of 24 out of 36 large-scale Korean-type nuclear reactors, including Shin Hanul units 3 and 4.

Despite the recent rapid rise in the stock price, there is still ample room for further growth. The outlook for orders of both large-scale nuclear power plants and small modular reactors (SMRs) is bright. Last year, Hyundai Engineering & Construction, together with U.S. nuclear company Westinghouse, was selected as the preferred bidder for the Kozloduy nuclear power plant project in Bulgaria and is expected to sign a construction contract by the end of this year. The contract is valued at 10 trillion won, which is equivalent to one-third of Hyundai Engineering & Construction’s annual revenue. In addition, the company has secured exclusive rights for the design, procurement, and construction of the SMR-300 from Holtec, a U.S. SMR technology firm, and plans to begin construction of two SMR-300 units at the Palisades nuclear site in the U.S. between the end of this year and early next year. Hyundai Engineering & Construction expects its annual order volume for nuclear and SMR projects, which stands at around 3 trillion won this year, to rise to 7 trillion won by 2030.

The global policy shift toward “pro-nuclear” energy is also fueling optimism. The Trump administration in the United States is accelerating domestic nuclear power plant construction with the goal of increasing nuclear generation capacity from the current 97 GW to 400 GW. In the European Union, countries are abandoning anti-nuclear policies and moving toward SMR construction. With the nuclear market expanding, Hyundai Engineering & Construction’s extensive construction experience is expected to provide more opportunities for new orders.

Kim Saeryeon, a researcher at LS Securities, analyzed, “The global trend of expanding nuclear power is creating additional opportunities for Hyundai Engineering & Construction, which is collaborating with the United States.” Kim Giryong, a researcher at Mirae Asset Securities, also commented, “Although there are concerns due to the recent sharp rise in the stock price, considering past cases where construction companies received valuation premiums for overseas growth potential, it is too early to discuss the upper limit.”

At the same time, the company continues to perform solidly in the architecture and housing sectors. Hyundai Engineering & Construction is expanding new orders in urban redevelopment projects, leveraging the high popularity of its premium brands such as “Hillstate” and “THE H.” The number of housing units supplied, which was 14,450 in 2023, recovered to about 23,600 last year. Notably, the proportion of low-margin projects sold during the period of sharply rising construction costs in 2021?2022 is expected to decrease from 91% last year to 53% this year and 26% next year, which should improve profitability.

Leap Forward After This Year’s Turnaround

Based on these factors, a full-fledged recovery in performance is expected to begin in the second half of the year. Mirae Asset Securities estimates Hyundai Engineering & Construction’s consolidated results for this year at 30.6 trillion won in revenue and 1.0954 trillion won in operating profit. Kyobo Securities forecasts 30.8 trillion won in revenue and 1 trillion won in operating profit. While revenue is expected to decrease slightly year-on-year, operating profit is projected to return to the black.

Major securities firms are also raising their target prices for the stock. Recently, KB Securities raised its target from 74,000 won to 94,000 won, while LS Securities and Kyobo Securities see potential for the stock to reach 95,000 won and 92,000 won, respectively. Daishin Securities expects it to rise to 86,000 won. According to FnGuide, the consensus target price for Hyundai Engineering & Construction (within one month) is approximately 79,600 won.

Additionally, Mirae Asset, LS, KB, and Kiwoom Securities have all selected Hyundai Engineering & Construction as their top pick in the construction sector. Lee Sangho, a researcher at Kyobo Securities, explained, “Profitability from the recovery in housing starts after 2024 is expected to drive growth next year, and the company’s stable plant and nuclear businesses provide a mid- to long-term plan for further expansion of both scale and margins, making it our top pick.”