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Hyundai Engineering & Construction |
[Alpha Biz= Kim Sangjin] Hana Securities Raises Hyundai Construction's Target Price to KRW 40,000, Optimistic About Recovery in 2024
Hana Securities has raised the target price for Hyundai Construction from KRW 36,000 to KRW 40,000. Despite a large loss last year due to significant cost recognition, the firm believes the bottom has been reached, and the potential for stock price growth has increased.
Hana Securities stated, "The large-scale cost recognition in 2024 has addressed the uncertainties regarding Hyundai Construction's potential cost absorption and scale." They further noted that costs incurred in overseas projects, which had been continuously eroding margins, have now resolved uncertainties.
The company has also assessed cost improvements in domestic housing projects based on the proportion of projects launched each year. As a result, they believe Hyundai Construction's estimated operating profit guidance of KRW 1.2 trillion (KRW 440 billion from Hyundai Construction and KRW 630 billion from Hyundai Engineering) is achievable, increasing the potential for stock price growth.
Hana Securities has upgraded Hyundai Construction to its top pick within the sector and strongly recommends a buy. They mentioned, "While the recovery of the housing market is not immediately visible, Hyundai Construction's current valuation is very cheap compared to its performance, and the company is expected to see an upward cycle until 2027."
In Hyundai Construction's Q4 results for last year, sales decreased by 15% year-on-year to KRW 7.3 trillion, with an operating loss of KRW 1.7 trillion, falling short of the market consensus. They are estimated to have recognized KRW 1.5 trillion in costs from Hyundai Engineering and KRW 400 billion from Hyundai Construction. The costs in Indonesia were related to air compliance and increased volumes, while in Saudi Arabia, quality costs and vendor delivery delays contributed to the costs. Additionally, Hyundai Engineering made cost adjustments in domestic housing projects.
For 2024, Hyundai Construction is aiming to launch 19,227 units, while Hyundai Engineering plans to launch 6,344 units. The company has set its 2024 performance guidance at an annual revenue of KRW 30.4 trillion, operating profit of KRW 1.18 trillion, and new orders of KRW 31.1 trillion.
Alphabiz Reporter Kim SangJin(letyou@alphabiz.co.kr)
