[Edaily Reporter Kwon Oh Seok ] Hana Securities announced on the 30th that it is maintaining its “Buy” rating on GS Engineering & Construction Corp(006360)but lowering its target price from 52,000 won to 36,000 won.

Kim Seung-jun, an analyst at Hana Securities, stated, “Although second-quarter earnings were weak as past issues were reflected in current costs, the fact that cost structures are gradually improving is positive.” He added, “Because costs have already been factored in, earnings improvement will actually become more pronounced as we move into next year. Furthermore, data center orders that may materialize in the second half of the year could trigger upward revisions to earnings estimates and lead to a higher valuation.”
He noted, “In particular, regarding the Donghae AIDC (AI Data Center) project being pursued by GS Holdings, since GS Engineering & Construction Corp. and Zai C&A appear capable of handling it entirely on their own, securing this order would have a significant impact on earnings.” He added, “Although the stock price fell sharply following the earnings announcement, there is a high likelihood of a stock price rally in the second half driven by progress on the data center project.”
GS Engineering & Construction Corp’s earnings, released the previous day, showed second-quarter revenue of 2.8 trillion won (down 13.0% year-over-year) and operating profit of 91.4 billion won (down 43.6%), both falling short of market estimates (operating profit of 119.0 billion won). Consequently, the stock price plummeted by nearly 13%.
Analyst Kim noted, “While gross profit significantly exceeded expectations—with the gross profit margin (GPM) for the Construction & Housing segment at 17.6% and the Infrastructure segment at 22.0%—the company’s earnings fell short of estimates due to selling, general, and administrative expenses (SG&A) totaling 314.6 billion won,” adding "Regarding notable developments by business segment, margins in the Construction and Housing division improved by approximately 100 billion won due to completion settlement gains and cost-optimized projects, and the cost ratio is stabilizing in the mid-80% range," he explained.
He continued, “The Infrastructure segment was impacted by a contract value increase for the Vietnam Metro project (approximately 40 billion won). The Plant segment pre-reflected an estimated loss of about 50 billion won related to the closure of an incinerator operation site. Regarding selling, general, and administrative expenses (SG&A), bad debt provisions of approximately 100 billion won were recognized,” he added, noting, “The number of residential units sold in the second quarter was 6,521 (cumulative total for the first half: 10,950), and orders received totaled 5.2 trillion won (4.7 trillion won from the Construction and Housing segment).”
Third-quarter revenue is estimated at 2.8 trillion won (-12.5%), and operating profit at 129.6 billion won (-12.7%). Analyst Kim added, “We believe the cost-to-revenue ratio for construction and housing is normalizing to the mid-80% range, and we expect margins to gradually improve.” He continued, “We anticipate 16,000 units sold through the third quarter, which is expected to exceed the annual guidance of 14,000 units. Accordingly, we forecast a rebound in housing construction revenue starting in 2027.”