[Edaily Reporter Kwon Oh Seok ] IBK Investment & Securities announced on the 5th that it is maintaining its “Buy” rating and target price of 31,000 won for DaewooEngineering&Construction(047040).

Cho Jeong-hyun, an analyst at IBK Investment & Securities, stated, “Second-quarter operating results showed revenue of 2.0 trillion won (down 10.1% year-over-year) and operating profit of 232.3 billion won (up 182.6%). Revenue met market expectations, while operating profit exceeded the consensus estimate of 160.7 billion won by 44.6%,” he said. “The fact that profitability significantly exceeded expectations stems from the inclusion of one-time gains totaling 82.9 billion won, resulting from final settlements for completed housing and construction projects, increases in contract amounts, and adjustments to estimated cost ratios.”
The analyst continued, “Even excluding these one-time items, the gross profit margin (GPM) for the housing and construction segments stood at 15.6%, indicating that the sharp improvement in performance is continuing even when accounting for one-time factors.”
He emphasized that what is more noteworthy than the earnings results is the 50.0% upward revision of the new order target from the previous 18 trillion won to 27 trillion won. He explained, “While the order plan at the beginning of the year largely excluded five major projects—including the Dukovany Nuclear Power Plant in the Czech Republic, the Papua New Guinea project, the ‘Indorama’ chemical plant in Nigeria, the Mozambique LNG project, and the infrastructure work for the new Gadeokdo Airport—we raised the target this quarter because we believe the visibility for securing orders in the second half has improved.”
He added, “Even if only half of these five projects are secured, approximately 9 trillion won in new orders could be added; combined with the 7.1 trillion won in orders secured in the first half, there is a strong possibility of achieving the annual target.”
Cash recovery trends are also positive. With unsold units gradually decreasing—from 6,750 units in the fourth quarter of last year to 5,170 units in the first quarter of this year and 3,989 units as of last month—he expects the burden of accounts receivable from residential projects to ease. Researcher Cho added, “However, given that approximately 900 billion won in cash was spent on land acquisitions for the Vietnam project and the debt-to-equity ratio stands at 266.5%, we need to continue monitoring the pace of cash recovery through unit sales and land sales in the Vietnam project next year.”