[Click e-Stock] "GS Engineering & Construction: Lower Expectations for Next Year... Rebound Expected in 2027"

On December 30, Korea Investment & Securities maintained its "Buy" investment rating and target price of 27,000 won for GS Engineering & Construction, stating that while expectations for next year's performance should be lowered, a rebound is anticipated in 2027.

Kang Kyungtae, an analyst at Korea Investment & Securities, said, "Given the sluggish housing pre-sales expected in 2025, forecasts for 2026 performance should be adjusted downward. However, as pre-sales performance bottoms out, results are expected to rebound in 2027. This outlook is based on improving leading indicators rather than the current weak performance."

Korea Investment & Securities estimated GS Engineering & Construction's consolidated revenue for the fourth quarter of this year at 3.134 trillion won, down 7.5% year-on-year, and operating profit at 107.4 billion won, up 167.1%. Kang explained, "Compared to the consensus (the average of securities firms' forecasts), revenue is in line, but operating profit is 6.6% lower. The slight shortfall in operating profit versus consensus is due to insufficient consolidated revenue from the architecture and housing divisions and a decrease in revenue from high-margin new business segments."

Fourth-quarter new business revenue is estimated at 464.8 billion won, a 24.9% decrease from the third quarter. Kang noted, "This is because one-off effects such as lump-sum payments by buyers in the Vietnam development project, which occurred in the third quarter, have been excluded."

Revenue from the architecture and housing divisions is projected to bottom out in 2026 and rebound from 2027. Kang explained, "This is due to a significant decrease in the burden of guarantees for uncommenced project financing (PF). As of the end of the fourth quarter of 2025, the outstanding balance of bridge loan PF guarantees is estimated at 1.5 trillion won, down 33.3% from 2.3 trillion won at the end of the third quarter. This decrease is attributable to the conversion of some large-scale sites in regional areas, including Osan in Gyeonggi Province, Daejeon, Cheonan, and Asan, to main PF." He added, "The number of housing units pre-sold by GS Engineering & Construction has declined for three consecutive years since 2022 and is expected to fall below 10,000 units in 2025, but will begin to bottom out from 2026."