KB Securities: "September 7 Housing Supply Plan Lacks 'Turning Point' Factors for Construction Stocks"

On September 8, KB Securities assessed that the "September 7 Housing Supply Expansion Plan," the first housing supply policy of the Lee Jaemyung administration, will not serve as a "turning point" for the sluggish stock prices of construction companies. Given that the stock prices in the construction sector have already undergone significant corrections and there is no clear rebound momentum, KB Securities recommended that investors take a long-term rather than short-term approach.

Jang Moonjun, a research analyst at KB Securities, stated in the report "Impact of the September 7 Housing Supply Expansion Plan on Construction Stocks" released on the same day, "Due to the repeated announcements of housing supply measures and low implementation rates by previous administrations, stock market investors no longer respond strongly to the 'numbers' of housing supply targets."

The previous day, the government, in a joint effort with related ministries, unveiled a plan to supply a total of 1.35 million housing units in the Seoul metropolitan area over five years by commencing construction on 270,000 units annually. This first housing supply plan by the Lee Jaemyung administration includes measures such as expanding the role of Korea Land and Housing Corporation (LH) and converting LH-owned non-residential land for housing supply in the metropolitan area, increasing urban housing supply by utilizing idle sites, and launching the second season of public urban complex projects. Alongside the supply plan, additional regulations were also announced, including stricter loan-to-value (LTV) ratios in regulated areas and a 200 million won cap on jeonse loans for single-home owners.

Jang evaluated the latest housing policy by stating, "There are no factors in the current stock price trends of the construction sector that would create a turning point." He pointed out, "With the public sector, such as LH, playing an increasingly emphasized role as a housing supplier and the use of public idle land in urban areas, it will be difficult to shift stock market investors’ attention to companies with a high proportion of private housing business."

He further explained, "The stock prices of construction companies, especially those with a high proportion of domestic housing business, have continued to underperform over the past two months due to the ongoing real estate regulatory stance, labor issues represented by the Yellow Envelope Law (amendments to Articles 2 and 3 of the Trade Union and Labor Relations Adjustment Act), and strengthened regulations on fatal accidents." He added, "Although the sector has experienced significant corrections, there is no clear momentum for a rebound at present."

Accordingly, Jang emphasized that companies with a high proportion of housing business require a long-term investment approach. Specifically, among the companies covered by KB Securities, he judged that Samsung C&T’s stock price would perform well in September. He explained, "As the third quarter is expected to be the bottom for earnings, we can look forward to a new three-year shareholder return policy at the end of January next year."

In the case of Samsung Engineering & Architecture, he assessed that its relatively low proportion of domestic housing business continues to be an attractive factor, but expectations for improvement in its core business have already been reflected in the stock price. He noted, "Whether shareholder returns increase will be important for future trends." Regarding Hyundai Engineering & Construction, his top pick, he analyzed, "Although uncertainties regarding earnings and domestic business are weighing on the stock price, as these uncertainties decrease and expectations for nuclear power become more prominent from late September to October, an active approach will be necessary."