[Edaily Marketin KIM YEON-SEO Reporter] Korea Ratings Corporation has upgraded the credit rating on HD Hyundai Construction Equipment(267270)’s unsecured bonds from “A (Positive)” to “A+ (Stable).” The agency determined that the company’s earnings power and financial stability have improved following its merger with HD HYUNDAI Infrastructure & Core, which expanded its business scale and portfolio.

On the 5th, Korea Ratings announced that it had upgraded HD Construction Equipment’s unsecured corporate bond credit rating to ‘A+’ and assigned a ‘Stable’ outlook. The commercial paper credit rating was assessed at ‘A2+’.

Korea Ratings cited the enhanced business stability resulting from the absorption merger with HD HYUNDAI InfraCore last January as the primary factor behind the rating upgrade. Through the merger, HD Construction Equipment secured the two brands, HYUNDAI and DEVELON, and established itself as a top-tier player in the domestic construction machinery market and a mid-to-upper-tier player globally.

In particular, the agency assessed that the company’s earnings structure has improved as the share of its highly profitable engine and after-sales service businesses has expanded. While the construction equipment manufacturing business is subject to high earnings volatility due to market conditions, the analysis indicates that the engine and after-sales service businesses—which generate more than half of the company’s total operating profit—are mitigating this volatility.

In fact, cumulative revenue and operating profit for the first three quarters of this year increased by 15.0% and 66.5%, respectively, compared to the pro forma results for the same period last year assuming the merger had already taken place. The operating profit margin also rose from 6.0% to 8.7% during the same period. Increased sales of medium- and large-sized equipment, higher selling prices, and reduced promotional expenses drove the improvement in profitability.

Korea Ratings & Investment Forecast (KRIF) projected that solid profitability will be maintained going forward, driven by a recovery in construction machinery demand and expanded sales of engines for power generation and defense applications. It also forecast that merger synergies—such as consolidated raw material procurement, component standardization, and the realignment of roles across production bases—will gradually become apparent.

Shin Joong-hak, a senior researcher at Korea Engineering & Construction Rating, “While working capital burdens resulting from business expansion and annual capital expenditures of around 400 billion won are expected to continue, we believe the company will be able to cover a significant portion of these funding needs internally based on its enhanced operating cash flow generation,” he said. “Based on its expanded profit-generating capacity and strong financial buffers, the company is expected to maintain excellent financial stability while keeping debt burdens under control.”