 |
(Photo= Yonhap news) |
[Alpha Biz= Reporter Kim Sangjin] Hyundai Engineering & Construction (Hyundai E&C) reported disappointing third-quarter results, leading Yuanta Securities to lower its target price by 18% to 42,000 won. Despite maintaining a "Buy" recommendation, the firm highlighted concerns about a shrinking return on equity (ROE).
In a report released on the 23rd, Yuanta noted that despite revenue growth, frequent cost factors have hindered profit growth. They identified potential positive contributors such as self-operated projects, investment development projects, and nuclear power ventures, but emphasized that it is too early for these variables to significantly impact performance.
For the third quarter, Hyundai E&C recorded sales of 8.3 trillion won, a 5% increase year-on-year, while operating profit plummeted by 53% to 1.143 trillion won, falling 17% short of consensus estimates.
Yuanta pointed out that although sales have grown year-on-year for ten consecutive quarters, operating profit margins remained in the 1% range due to approximately 70 billion won in additional costs from the Saudi Marjan development project and extra cost settlements at housing construction sites. They noted that despite recognizing a pre-tax profit of 32.5 billion won from the Seoul-Chuncheon Expressway fund settlement, there were valuation losses due to a decline in the exchange rate.
Yuanta Securities stated that for a valuation recovery, confirmation is needed that additional cost reflections from ongoing domestic and international projects have come to an end. They foresee continued challenges to Hyundai E&C’s profitability in the short term.
AlphaBIZ Kim SangJin(letyou@alphabiz.co.kr)
