[Edaily Reporter Kim Hyung-il ] Yuanta Securities Korea maintained its “Buy (BUY)” investment rating and target price of 205,000 won for HyundaiEngineering&Construction(000720). The firm believes the company has a high probability of achieving its annual order target amid continued improvements in cost ratios in the housing sector, and that the medium- to long-term growth potential of its nuclear power business remains valid. Although the timing of nuclear power-related contracts is generally being delayed, the firm forecasts that a revaluation of the company’s enterprise value will be possible once the awarding of main construction contracts and the commencement of construction gain momentum.

On the 19th, Kim Do-yeop, an analyst at Yuanta Securities Korea, estimated that HyundaiEngineering&Construction’s third-quarter consolidated revenue would total 6.5433 trillion won, a 16.4% decrease year-over-year, while operating profit would rise 108.8% to 216 billion won. He projected that both revenue and operating profit would be in line with the market consensus of 6.7797 trillion won and 209.6 billion won, respectively. The operating profit margin is expected to be 3.3%.

The firm estimated that the trend of improving cost ratios in the residential segment continued in the third quarter, following the second quarter. In contrast, for the civil engineering segment, it projected that cost ratios would remain at second-quarter levels due to design changes and increased material volumes at the North-South Expressway elevated highway site in Singapore. The estimated cost ratio for that site is 105.3%.

In the plant sector, the firm expects the impact of high-cost projects in Saudi Arabia to persist, and costs associated with accelerating the Shahin project are also expected to be reflected. However, since a significant portion of the Shahin-related costs was already reflected in the second quarter, the cost ratio for the third quarter is projected to improve to 101.8% compared to the second quarter.

Order intake is also nearing the annual target. Cumulative new orders for the third quarter are estimated at approximately 29 trillion won on a consolidated basis and approximately 17 trillion won on a standalone basis. This represents about 87% of the annual order intake guidance of 33.4 trillion won on a consolidated basis.

In the fourth quarter, the company expects orders to include approximately 2.1 trillion won from the Papua New Guinea liquefied natural gas (LNG) project and approximately 1.2 trillion won from the Wando offshore wind project, as well as contracts converted from the Ansan data center and urban redevelopment projects. Taking this into account, analysts believe there should be no difficulty in achieving the annual order target.

While the nuclear power business is maintaining its growth trajectory, the timing of contract awards is generally being delayed. Regarding the Palisades Small Modular Reactor (SMR) project in collaboration with Holtec, since Holtec is focusing its resources on the restart of existing nuclear power plants, even the partial contracts currently under discussion for completion within the year are expected to move into full-scale implementation only after the restart of those existing plants.

A bid for the TerraPower SMR project is scheduled for the fourth quarter, and HyundaiEngineering&Construction is expected to participate. However, the Engineering, Procurement, and Construction (EPC) contract is projected for 2027. Regarding the Kozloduy Nuclear Power Plant project in Bulgaria, the scope of services for the second Engineering, Supply, and Construction (ESC) contract is currently under discussion, and the main contract is expected to be signed by the end of 2027.

Analyst Kim stated, “We believe HyundaiEngineering&Construction possesses the broadest pipeline of nuclear power plant orders within the construction sector,” adding, “Once the award of main EPC contracts and the commencement of construction for nuclear power plants gain momentum, the driving force behind a revaluation of the company’s enterprise value will also strengthen.”