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[Alpha Biz= Paul Lee] SEOUL, Oct. 20 — Korea Investment & Securities said Monday that Hyundai Engineering & Construction (Hyundai E&C) is expected to post a significant earnings shock in the third quarter, prompting the brokerage to lower its target price by 18.9%, from ₩95,000 to ₩77,000.
Despite the downgrade, the firm maintained its “Buy” recommendation, citing Hyundai E&C’s long-term growth potential in nuclear power projects. The company’s stock closed at ₩56,000 in the previous session.
Korea Investment & Securities projects Hyundai E&C’s Q3 consolidated revenue at ₩7.1627 trillion and operating profit at ₩76.4 billion — the latter 64.1% below market consensus despite meeting expectations for sales.
Analyst Kang Kyung-tae explained,
“The client of Hyundai Engineering’s Polimery Police PDH-PP (Propane Dehydrogenation and Polypropylene) project in Poland demanded that financial institutions fulfill the ₩170 billion performance bond (P-Bond) guarantee. This cost was reflected as a deduction in revenue for the third quarter.”
He added that Hyundai E&C also incurred ₩30 billion in settlement costs with subcontractors at residential construction sites nearing completion.
Kang noted that Hyundai E&C’s “big bath” accounting strategy in 2024 — aimed at cleaning up losses in one go — “has failed to deliver the intended results.”
“We are revising our 2024 consolidated operating profit forecast downward by 40.6% to ₩618.5 billion, and our 2025 estimate by 58.1% to ₩663.8 billion,” he said.
“Investors will likely need to lower expectations until at least 2027, when profitability in both plant and housing divisions begins to normalize.”
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
