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Photo courtesy of Yonhap News |
[Alpha Biz= Paul Lee] SEOUL – Shinyoung Securities on July 31 reaffirmed its “Buy” rating on GS Engineering & Construction (GS E&C) and raised its target price from ₩23,000 to ₩26,000, citing renewed focus on the company’s core business and stronger-than-expected earnings.
Analyst Park Sera noted GS E&C posted Q2 revenue of ₩3.196 trillion (down 3.1% YoY) and operating profit of ₩162.1 billion (up 73.5% YoY). While revenue met market consensus, operating profit significantly exceeded expectations.
Park attributed the profit strength to:
Completion settlement effects in domestic housing and construction projects
Reversal of provisions for bad debts
She also pointed out that weakness in the Elements Europe business led to liquidation proceedings, indicating that GS E&C will inevitably scale back its new business exposure.
However, she emphasized that this retrenchment could actually benefit the company:
“Expanding into new businesses was a positive attempt to diversify, but it also clouded valuation for what is fundamentally a construction company,” Park explained.
Looking ahead, Park expects GS E&C’s plant division to drive revenue growth, while the housing division, having managed 22,000 unit handovers in the first half, will regain capacity to aggressively pursue new contract wins in the second half of 2024.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
