[E-Daily Reporter Kwon Oh Seok ] IBK Investment & Securities announced on the 15th that it is maintaining its “Buy” rating on DL E&C CO., LTD.(375500)but lowering its target price from 131,000 won to 107,000 won.

Cho Jeong-hyun, an analyst at IBK Investment & Securities, explained, “There is no doubt about the company’s earnings growth and profit improvement. However, the sluggish performance of its plant business is a cause for concern.” He added, “The basis for large construction firms receiving higher valuations than small and medium-sized ones stems from their expanded scope of work and relatively higher revenue. To meet these criteria, DL E&C CO., LTD. needs to demonstrate scalability by securing plant orders.”
Second-quarter operating results are estimated at 1.7 trillion won in revenue (down 14.4% year-over-year) and 119.4 billion won in operating profit (down 5.4%). Operating profit is projected to exceed market expectations of 111.9 billion won by 6.7%. He elaborated, “The basis for this estimate is that, while housing sales are expected to increase compared to the previous quarter, a healthy
cost ratio is expected to drive earnings growth,” he elaborated.
He further analyzed, “In the residential sector, we estimate stable revenue growth alongside a cost-to-sales ratio of 81.0%. Contrary to concerns, we believe the impact of rising raw material prices and supply disruptions will be limited, and we expect profitability to improve as the effect of contract value increases in private-public partnership projects is partially reflected.”
Researcher Cho added, “In the plant sector, revenue is expected to decline due to a lull in new orders and major projects entering the completion phase, but the cost-to-sales ratio is projected to improve slightly compared to the first quarter.”
He noted that new orders continue to show a favorable trend, particularly in the housing and plant sectors. “In the housing sector, we estimate that the company secured approximately 2.5 trillion won in orders in the second quarter by winning contracts for projects such as the Hannam 5 District and Jeungsan 4 District,” he emphasized. “In the plant sector, new orders of about 500 billion won are expected, centered on the Jeju Clean Combined Cycle Power Plant.”
He also said, “The likelihood of achieving the annual order guidance target is expected to increase significantly if the robust order trend in the housing sector is combined with the award of the Batan Bridge project in the Philippines, valued at 940 billion to 1 trillion won.”