[Edaily Reporter KIM YOON-JEONG ] IBK Investment & Securities named GS Engineering & Construction Corp(006360)as its top pick for the second half of the year, noting that while short-term earnings may be somewhat sluggish, the company is expected to benefit from a recovery in housing orders and supply, as well as momentum in data center development.

On the 8th, Jo Jeong-hyun, an analyst at IBK Investment & Securities, stated, “More important than the weak earnings is the fact that leading indicators, such as orders and supply, are recovering,” adding, “We are designating the company as our top pick, considering that its financial position has entered a healthy recovery phase and its order pipeline is also expanding.”
IBK Investment & Securities projected that GS Engineering & Construction Corp.’s second-quarter consolidated revenue would decline 11.4% year-over-year to 2.8 trillion won, while operating profit would fall 29.6% to 114 billion won. This is 10.2% below the market consensus of 127 billion won.
Analyst Cho explained, “Even taking into account the revenue increase due to seasonal recovery and the improvement in construction and housing cost ratios in the second quarter, the company faces earnings pressure given that annual selling, general, and administrative expenses are expected to amount to around 800 billion won.”
However, he emphasized that attention should be focused on the recovery in order intake rather than earnings. Analyst Cho said, “Cumulative order intake for the first half of the year is estimated at approximately 7.6 trillion won, with more than 90% of this coming from the construction and housing sectors,” adding, “As of the end of June, 11,000 units have been sold out of the annual guidance of 14,000 units.”
He predicted that the data center business would be the key driver of stock price momentum in the second half of the year. Analyst Cho said, “The GS Holdings Group is currently reviewing the construction of a 2.4-gigawatt (GW) data center and has outlined plans for 1.2 GW by 2028 and another 1.2 GW by 2029,” and “Although the scope of construction has not yet been finalized, assuming construction costs of 8 to 10 billion won per megawatt (MW), we estimate that the 1.2 GW project alone could generate potential construction volume worth around 10 trillion won,” he explained.
He continued, “Since the specific project structure has not yet been finalized, it is too early to reflect this in earnings estimates, but it is the most important variable for order momentum in the second half of the year.”
Researcher Cho added, “The key to the order-winning industry lies in the growing willingness of major clients to invest in fixed assets, backed by actual, executable financing,” noting, “While GS Holdings’ ability to secure financing requires further verification, it is positive that the company’s financial situation has entered a healthy recovery phase and its order pipeline is expanding.”