[Edaily Reporter Kwon Oh Seok ] IBK Investment & Securities announced on the 3rd that it is maintaining its “Buy” rating on HyundaiEngineering&Construction(000720)but lowering its target price from 260,000 won to 160,000 won.

Cho Jung-hyun, an analyst at IBK Investment & Securities, stated, “The reason for lowering the target price despite improved profitability lies in delays in securing orders for large-scale nuclear power plants (such as Kozloduy in Bulgaria and Fermi Matador) and delays in cash recovery schedules,” adding "Delays in securing PPAs (Power Purchase Agreements) and the client’s funding are pushing back the overall EPC (Engineering, Procurement, and Construction) contract schedule; therefore, we expect the actual securing of nuclear power plant projects to materialize between 2027 and 2029," he analyzed.
He emphasized, “From a financial perspective, we need to be wary of the increase in uninvoiced work and accounts receivable. While this appears to reflect a temporary rise in accounts receivable resulting from the shift of some housing projects to a post-sales model, even taking this into account, the growing burden of working capital remains a concern,” adding, “Before expanding into new projects, we need to apply more conservative management standards regarding the collectability of receivables by site, the creditworthiness of clients, and the progress of construction.”
Previously, second-quarter operating results showed revenue of 6.8 trillion won (down 11.4% year-over-year) and operating profit of 261.8 billion won (up 20.6%). Operating profit exceeded market expectations of 213.7 billion won by 22.5%. Researcher Cho explained, “Second-quarter profitability reflected both positive factors and one-time costs. On a standalone basis, costs related to the loss of the arbitration case regarding the Colombian wastewater treatment plant and expenses to accelerate the Ulsan Shahin project were reflected, leading to an increase in the cost-to-revenue ratios for Infrastructure (105.4%) and Plant (113.0%).”
In contrast, the Construction and Housing segment continued to see an improvement in its revenue mix without any notable issues, and the cost-to-revenue ratio for Construction and Housing fell to 86.8% in the second quarter. He noted, “Although there have been delays in the deployment of equipment and personnel at four sites in the Middle East, including the Iraq WIP project, the project delays are not severe, and since compensation from the client is possible, the short-term impact on earnings is expected to be limited.” He added, “Considering that major high-cost plant sites are scheduled for completion within the year, plant profits in 2027 are likely to improve.”
He added, “Our subsidiary, Hyundai Engineering, also drove the improvement in consolidated earnings, thanks to an improved cost ratio at the plant site in Poland and expanded domestic sales. While the possibility of additional costs for the Shahin project remains, a significant portion was already reflected in the first half of the year, so the burden in the second half is expected to be reduced.”