Kyobo Securities has projected that GS Construction will see improved performance starting next year, driven by the normalization of its core business and an expansion in data center contracts, despite ongoing cost pressures from overseas projects. The firm maintained a 'buy' rating and raised its target price from 34,000 won to 43,000 won.
Lee Sang-ho, a researcher at Kyobo Securities, stated on November 11, "As the visibility of data center construction increases, we expect tangible revenue and profit growth. The diversification of contracts from a focus on residential projects to non-residential sectors like data centers is a positive change."
For the third quarter, GS Construction reported consolidated revenue of 2.744 trillion won, a 14.5% decrease compared to the same period last year, while operating profit fell by 35.7% to 95.5 billion won. Revenue slightly missed market expectations by 1.0%, but operating profit was 20.6% below the consensus estimate of 120.2 billion won.
The profitability of the housing sector remained strong, with the gross profit margin (GPM) for the construction and housing segment improving by 3.8 percentage points year-on-year to 15.6%. However, the infrastructure segment recorded a GPM of -4.5% due to an additional cost of approximately 38 billion won from Australian infrastructure projects. Delays in the Saudi Yanbu project also limited the plant segment's GPM to around 4.5%.
Lee noted, "We expect profit improvements from maintaining housing sector profitability and normalizing cost rates in overseas plant and infrastructure projects." He added that new contracts are anticipated to expand, focusing on domestic urban redevelopment projects and data centers.
* This article has been translated by AI.
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