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[Alpha Biz= Kim Sangjin] LS Securities Maintains Buy Rating for Hyundai E&C, Lowers Target Price to 37,000 Won on Revised Earnings Estimates and Anticipated Momentum from Nuclear Power Orders
On Wednesday, LS Securities maintained its "Buy" rating for Hyundai Engineering & Construction (Hyundai E&C) while lowering its target price from 40,000 won to 37,000 won. The adjustment reflects revised earnings estimates, with expectations that future nuclear power plant orders could serve as a catalyst for the stock's momentum.
LS Securities stated, "Hyundai E&C's Q4 revenue is projected to reach 8.362 trillion won, remaining relatively consistent year-on-year and aligning closely with consensus estimates. However, operating profit is estimated at 523 billion won, down 63.8% year-on-year and falling 56.4% short of the consensus estimate of 1.199 trillion won."
The firm added, "Revenue growth is expected to continue, driven by the commencement of large-scale urban redevelopment projects in Korea and the ramp-up of overseas projects, such as the Basra refinery in Iraq and the Marjan oil field in Saudi Arabia."
LS Securities also noted, "The appointment of a new CEO at Hyundai Engineering appears to be accompanied by an overall restructuring effort. This includes cost reviews at overseas sites, such as the Zafura gas project in Saudi Arabia, which is likely to reflect one-off costs in the current quarter's financial results. As a result, downside risks to earnings remain in play."
The firm highlighted that Hyundai E&C's strong topline growth provides a solid foundation for future profit volume expansion once cost adjustments are complete. "Improvements in project mix from the phased completion of projects initiated in 2021, along with meaningful contributions to profit from the Saudi Amiral project, are expected to drive performance in the first half of this year," it stated.
Additionally, LS Securities pointed to the anticipated construction contract for the Kozloduy nuclear power plant in Bulgaria, valued at over 8 trillion won, in the latter half of the year. Combined with the gradual materialization of self-developed projects supported by Hyundai E&C's solid financial structure, these factors differentiate the company from its peers.
The firm concluded, "Following the recognition of one-off costs, gradual structural improvements and increasing expectations for nuclear power plant orders as the year progresses could act as key momentum drivers for Hyundai E&C's stock."
Alphabiz Reporter Kim SangJin(letyou@alphabiz.co.kr)
