Eugene Investment & Securities announced on August 3 that it has lowered its target price for Hyundai Engineering from 178,000 won to 154,000 won, reflecting slower-than-expected commercialization of U.S. nuclear projects despite the company securing a stable order base. However, the investment rating remains at 'Buy.'
Researcher Ryu Tae-hwan noted, "Hyundai Engineering's revenue for the second quarter of this year was 6.8423 trillion won, and its operating profit was 261.8 billion won, with revenue meeting estimates and operating profit exceeding market expectations." He explained that while most business divisions saw a decline in revenue due to last year's base effect, improved profitability in the engineering division partially offset this decline.
Hyundai Engineering secured a backlog of 104 trillion won as of the second quarter, equivalent to approximately 3.3 years of work based on last year's revenue. The company has established a stable growth foundation, bolstered by the competitiveness of its urban regeneration brand 'THE H,' increased volume from group affiliates, and large-scale complex development projects. There are also prospects for expansion into new businesses such as offshore wind and liquefied natural gas (LNG).
Expectations for the expansion of nuclear projects remain valid. Hyundai Engineering is expanding its collaborations with companies involved in next-generation small modular reactors (SMRs), including Westinghouse's AP1000 and AP300, Holtec's SMR300, as well as TerraPower, Torayzen, and Panco. However, it is anticipated that major projects, including the U.S. Pellisade SMR project, will only reach final investment decisions (FID) and formal contracts after securing power demand sources and power purchase agreements (PPAs).
Eugene Investment & Securities forecasts that Hyundai Engineering's revenue for the third quarter will be 6.6805 trillion won, with an operating profit of 229.9 billion won. While additional cost burdens related to the Shahin project are expected to continue, profitability in the construction, housing, and civil engineering sectors is projected to improve.
Ryu stated, "Considering the increased volatility in cost rates and delays in schedules for large nuclear and SMR projects, we adjusted the target price. However, if the business visibility of the Pellisade SMR and Fermi Matador projects improves, a significant reevaluation of the stock price could be possible."
* This article has been translated by AI.
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