[Weekend Money] The Industry That Solves Physical Shortages: Construction Is Rising

Brokerages Keep Raising Target Prices for Construction Stocks
"They Must Be Re-Evaluated as Infrastructure Partners of the AI Revolution"
Stronger Cost-Effectiveness and On-Time Delivery than Global Rivals

Securities analysts are arguing that the construction industry should now be re-evaluated as a key "infrastructure partner" for making the artificial intelligence (AI) revolution a reality. They say it is time to buy construction stocks, which have been somewhat sluggish. There are also signs that target prices for major companies such as Daewoo Engineering & Construction and DL E&C are being revised upward.

Park Sera, a researcher at Shinyoung Securities, recently stated this in an industry report titled "Construction, It Is Time to Buy," saying, "The essence of construction is an industry that addresses physical shortages." Park stressed, "Technology starts a revolution, but infrastructure completes it. Just as railways and ports did in the Industrial Revolution, AI also does not 'operate' without data centers and power." She explained that as demand for AI-related power and infrastructure expands in the current environment, the construction demand needed to materialize this will also remain strong for a long period.

In particular, Park emphasized, "The time has come for the essence and value of the construction industry to attract attention, and Korean construction companies are at the core of this." She assessed, "They will be recognized as the only ultimate executors capable of resolving the physical bottlenecks caused by a surge in overwhelming power demand, and as players with a superior 'probability of successful delivery' compared with other countries." Specifically, she pointed out that while U.S.-based Bechtel has extensive experience in building LNG power plants, it has also experienced cost overruns and schedule delays in the Vogtle project. By contrast, Korean companies such as Samsung C&T and Daewoo Engineering & Construction have clear advantages over foreign peers thanks to their repeated experience in nuclear power plant projects, cost-effectiveness, and adherence to construction schedules.

The rosy outlook surrounding construction stocks is not limited to this report. In its monthly report on the construction sector, Hana Securities said, "There are too many stocks we want to buy," naming GS Engineering & Construction and Samsung C&T as its top picks. Kim Seungjun, a researcher at Hana Securities, said, "The most meaningful factor in the earnings announcements of housing-related companies was housing margins. All of them recorded double-digit gross profit margins in the housing division," adding, "These are improved figures compared with 2024, and behind this is the completion of projects that started in 2021 to 2022 and had high cost ratios. Gross profit margins in 2026 will improve even further."

There are also signals that the real estate market is recovering. Housing starts in December came to 64,000 units (34,000 public units and 30,000 private units), down 2.2% from a year earlier. Unsold new homes totaled 67,000 units, down by 2,284 units from the previous month. The actual transaction price index for apartment sales in November rose nationwide, and the actual transaction index for apartment jeonse contracts in November also jumped sharply. Kim explained, "Recovery signals were confirmed in the December housing indicators," while noting, "Indicators related to housing starts remain sluggish, but the decline in unsold units in metropolitan cities is meaningful."

Shinyoung Securities, which presented this rosy outlook on the construction industry, on the same day raised its target price for Daewoo Engineering & Construction and DL E&C to 7,500 won and 68,000 won, respectively. It also lifted its target price for SAMSUNG E&A to 40,000 won. SangSangin Securities and IBK Investment & Securities likewise raised their target prices for Daewoo Engineering & Construction to 7,500 won and 8,200 won, respectively.

This has also fed into a rise in share prices of major construction stocks, including Daewoo Engineering & Construction. On the 10th, when the report was released, Daewoo Engineering & Construction closed the regular session at 7,060 won, up 22.36% from the previous trading day, boosted by expectations of an increase in new orders. GS Engineering & Construction rose 5.42%, DL E&C gained 2.28%, and Samsung C&T climbed 1.44%.