[Edaily Reporter Kim Hyung-il ] IBK Investment & Securities lowered its target price for HyundaiEngineering&Construction(000720)from 140,000 won to 120,000 won—a 14.3% reduction—citing a lack of momentum for the stock price as the awarding of main contracts for the company’s nuclear power business has not yet begun in earnest. Although third-quarter operating profit exceeded market expectations due to improved cost ratios in the housing segment and the likelihood of achieving annual earnings targets remains high, the firm believes it is necessary to confirm tangible contract results and improved cash flow in the nuclear power business. It maintained its “Buy” investment rating.

On the 2nd, Cho Jung-hyun, an analyst at IBK Investment & Securities, reported that HyundaiEngineering&Construction’s third-quarter consolidated revenue totaled 6.2 trillion won, a 20.3% decrease year-over-year. Operating profit rose 114.2% to 221.7 billion won, exceeding market expectations of 211.4 billion won by 4.9%.

The improvement in profitability was driven by the normalization of the cost-to-sales ratio in the housing segment. On a standalone basis, the revenue share from normal-margin housing projects—those started in 2023 or later—expanded from 46% at the end of 2025 to 76% at the end of the third quarter of this year. This reflects a decrease in the proportion of existing projects with low profitability and an increase in the revenue contribution from normal-margin projects.

However, the third quarter saw both one-time expenses and gains reflected in the results. In the civil engineering segment, additional costs of approximately 80 billion won were incurred at the North-South Highway project in Singapore, while the plant segment incurred approximately 43 billion won in additional costs from the Solomon Islands hydropower project. Conversely, the housing segment recorded a completion settlement gain of approximately 50 billion won from Hyundai Engineering, and the construction segment reflected an incentive of approximately 15.6 billion won from the Singapore Shota Tower project.

The likelihood of achieving the annual operating profit target was assessed as high. HyundaiEngineering&Construction’s cumulative operating profit for the first three quarters stood at 664.5 billion won, reaching 83.1% of the annual guidance of 800 billion won. Analysts note that since the annual target will be met if fourth-quarter operating profit exceeds 135.5 billion won, the likelihood of achieving the guidance is high.

However, analysts point out that it remains to be seen whether cash flow will improve. As of the end of the third quarter, consolidated cash and deposits stood at 3.5 trillion won, a decrease of 1.7 trillion won from the end of the previous year. During the same period, borrowings increased from 3.9 trillion won to 4.5 trillion won.

HyundaiEngineering&Construction projected that its year-end cash balance would recover to the year-end 2022 level through the inflow of interim and final payments for residential projects, milestone payments from overseas projects, and advance payments for new projects in the fourth quarter. However, IBK Investment & Securities emphasized the need to verify whether net debt is gradually decreasing, as the company’s cash recovery pace appears to be somewhat slower than that of its competitors.

The nuclear power business was also cited as a key challenge for a stock price rebound. HyundaiEngineering&Construction’s pipeline for major nuclear power contracts next year consists of large-scale nuclear power plants in the U.S. and Bulgaria, as well as small modular reactor (SMR) projects in the U.S. by companies such as Holtec and TerraPower. However, since the awarding of major global nuclear power contracts has not yet gained full momentum, analysts assess that it will be difficult to drive a stock price turnaround based solely on business expectations.

Analyst Cho stated, “We believe a meaningful stock price rebound will only be possible once the awarding of main contracts for nuclear power projects—which offer high long-term visibility—is actually confirmed,” adding, “The improvement in profitability in the housing sector and the likelihood of achieving annual earnings targets are positive factors.”