[Edaily Reporter Kwon Oh Seok ] NH INVESTMENT & SECURITIES announced on the 26th that it is maintaining its “Buy” rating on DaewooEngineering&Construction(047040)but lowering its target price from 50,000 won to 36,000 won.

Lee Eun-sang, an analyst at NH INVESTMENT & SECURITIES, explained, “We maintain our ‘Buy’ rating given the company’s valid status as a construction partner for Team Korea’s nuclear power projects and the potential for earnings to normalize starting this year.” However, he added, “We are lowering the target price by reducing the target multiple for the nuclear power sector due to weak stock prices among peer companies and adjusting our EBITDA (earnings before interest, taxes, depreciation, and amortization) estimates in light of delays in securing orders.”
He continued, “There are only three Korean construction companies, including DaewooEngineering&Construction, that have experience as lead contractors for nuclear power plants. Considering the business priorities of competitors, the likelihood of the company participating as a Team Korea construction partner remains valid,” and "We are maintaining the assumption of securing contracts for a total of six nuclear power plants over the next three years (two in the Czech Republic, two in Vietnam, and two in the U.S.), which is already factored into the target price calculation; however, we have slightly lowered our estimates to account for delays in securing orders. We also expect steady earnings growth across all business segments," he elaborated.
The analyst noted, “Following the ‘big bath’ in the fourth quarter of last year, the gross profit margins (GPM) by business segment confirmed in the first quarter of this year stood at 21% for housing and 17% for plants,” adding, “For the housing segment, we forecast earnings growth driven by the completion of high-cost projects and an expansion in the share of in-house projects. “For the plant division, additional profit growth is expected quarter after quarter as revenue expands from sites under sole-source contracts in key markets such as Mozambique and Turkmenistan,” he predicted.
Operating profit for the second quarter is expected to reach 184.5 billion won (up 125% year-over-year, with an operating profit margin of 8.6%), exceeding market consensus. He added, “We expect the Construction and Housing division to see earnings growth as the strong order intake from the previous quarter continues into this quarter,” noting, “Estimated new orders for the second quarter are 4.5 trillion won (up 51%).”