NH Investment & Securities announced on June 26 that it has lowered its target price for DL E&C from 140,000 won to 110,000 won, reflecting delays in securing contracts for Middle East plants. The firm maintained its "buy" rating on the stock.
Lee Eun-sang, a researcher at NH Investment & Securities, explained, "The delay in ceasefire negotiations is expected to push back the timeline for securing contracts in the Middle East, prompting the adjustment in our target price." The firm anticipates DL E&C's operating profit for the second quarter to decline by 18% year-on-year to 103.1 billion won. While operating profit is expected to decrease due to falling sales, profitability is projected to remain similar to last year.
However, the restructuring of contract awards focused on urban renewal and public housing is viewed positively. DL E&C has secured public housing projects in the Hannam 5 and Jungnang 4 districts this year, and has expanded its public housing business with the Korea Land and Housing Corporation (LH). Lee noted, "In the first half of the year, DL E&C actively participated in the public housing market, securing contracts worth 1.8 trillion won for Hannam 5, 1 trillion won for Jungnang 4, and 1.3 trillion won from LH for 2025," adding that the gross profit margin in the housing and construction sector was 20%, distinguishing it from competitors.
The small modular reactor (SMR) business is also identified as a long-term growth driver. Lee stated, "We are expanding our collaboration with U.S. SMR developer X-energy and are pursuing contracts for design services for the nuclear island, which includes core equipment. We also aim to participate in the Washington Cascade project for Amazon."
The impact of corporate tax imposition in Saudi Arabia is considered limited. Lee emphasized, "The estimated tax amount, considering the statute of limitations, is around 16 billion won, and there is no obligation to pay during the ongoing local appeal process. Therefore, the short-term impact on performance is expected to be minimal."
* This article has been translated by AI.
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