[Click e-Stock] "U.S. Partner Risk for Hyundai Engineering & Construction, Limited Impact on Fundamental Competitiveness"

"Valuation Appeal Remains Strong"

Hyundai Engineering & Construction shares underwent a correction as uncertainties surrounding its U.S. nuclear power partner came to the forefront. NH Investment & Securities assessed this as a short-term issue and suggested it could present a buying opportunity at lower prices.

In a report on the 15th, Lee Eunsang, a researcher at NH Investment & Securities, stated, "The decline in Hyundai Engineering & Construction's share price yesterday reflected negative developments related to its U.S. nuclear power partner, Fermi. However, this is unlikely to undermine the company's fundamental competitiveness." On the previous trading day, Hyundai Engineering & Construction closed at 73,100 won, down 4,900 won (6.28%) from the prior session.

The issue centers on Fermi's ongoing hybrid energy and AI campus initiative, known as Project Matador. This large-scale project, with an estimated power generation capacity of 11 GW and a total project cost of 500 billion dollars, encountered difficulties when a key tenant notified its intention to terminate the contract. As a result, there was a setback in securing approximately 150 million dollars in AICA (Advance Initial Construction Agreement) funding. In addition, U.S. law firms have begun investigating the possibility that Fermi's management provided false information, further heightening concerns about legal risks.

Lee analyzed that the actual impact on Hyundai Engineering & Construction is limited. He explained, "Hyundai Engineering & Construction signed the FEED (Front-End Engineering Design) contract for this project in October last year and is currently executing it. The FEED phase typically precedes the main EPC (Engineering, Procurement, and Construction) contract, and the market has partially factored in the potential for a large-scale EPC conversion into valuations."

He added, "While this issue may act as a short-term factor for share price adjustment by increasing the likelihood of a delay in the EPC conversion timeline, revenue recognized during the FEED phase accounts for only about 5% of the main EPC contract value, so the impact on the company's overall performance is not significant." He further noted that even if the project schedule is delayed, any financial impact should remain well within manageable limits.

There was also analysis that Hyundai Engineering & Construction's valuation appeal has become more pronounced. The company's current share price is trading at six times its projected 2027 EV/EBITDA, which represents a roughly 77% discount compared to Doosan Enerbility, the leading domestic nuclear value chain company.

Lee believes this excessive valuation gap will gradually narrow as visible construction momentum materializes, such as the start of a large-scale nuclear project in Bulgaria in the first half of 2026 and the commencement of the Palisades SMR project in the U.S.

He concluded, "Share price declines caused by partner-specific issues should be seen as buying opportunities at lower prices. Hyundai Engineering & Construction's competitiveness and long-term growth story within the nuclear value chain remain intact."