[Click e-Stock] "DL E&C to See Housing Performance Recovery from Next Year... Target Price Raised"

On December 31, Korea Investment & Securities raised its target price for DL E&C from 47,000 won to 50,000 won, anticipating a recovery in performance starting next year. The investment opinion was maintained as 'Buy'.

Kang Kyungtae, a researcher at Korea Investment & Securities, stated, "We have raised the target price by 6.4% compared to the previous level, as the 2026 net profit estimate has been revised up by 11.5%, resulting in a 0.9% increase in the estimated 2026 book value per share (BPS), and the applied return on equity (ROE) has been raised by 0.3 percentage points." He added, "We will continue to raise the target price by reflecting company-specific factors, such as order intake and entry into new markets, that can reduce the valuation discount compared to the market."

DL E&C's earnings for the fourth quarter of this year are expected to meet market expectations. Researcher Kang estimated, "DL E&C's consolidated sales for the fourth quarter are expected to decrease by 25.4% year-on-year to 1.8198 trillion won, and operating profit is estimated to decrease by 23.8% to 71.7 billion won, which is in line with the lowered consensus (the average of securities firms' forecasts)." He added, "The results show that the weakness in the plant business has been offset by the housing segment."

The key point to watch in the fourth quarter results is the cost ratio. Kang explained, "The cost ratio for the plant segment in the fourth quarter is estimated at 94.0%, as additional costs that have not yet been settled at domestic sites were incurred. Depending on whether contract amounts are increased, there could be significant swings in performance." He continued, "The cost ratio for the housing segment in the fourth quarter is estimated at 84.0%. Currently, the standalone housing cost ratio has stabilized in the mid-80% range, and considering events such as completion settlements, there is room for further decline."

The effects of improved construction starts since 2024 are expected to lead to a recovery in housing performance next year. Korea Investment & Securities forecasts DL E&C's consolidated operating profit next year to increase by 22.1% year-on-year to 483 billion won. Kang noted, "This is a 12.4% increase compared to the previous estimate. The key factor is the recovery in the housing segment's scale, and we estimate that housing revenue in 2026 will increase by 14.5% compared to 2025." Housing revenue has declined for three consecutive years since reaching 3.7 trillion won in 2022, falling to 2.6 trillion won in 2025. Kang explained, "This is because the scale of housing starts decreased every year until 2023, but the recovery that began in 2024 will be reflected from 2026." He added, "In addition, the stabilized cost ratio is expected to continue in 2026, so the housing segment's performance will offset the weakness in the plant segment."